Exhibit
10.11


 


LOAN AGREEMENT


 


Dated as of February 18, 2004


 


by and among


 


ARC18TX LP, ARC COMMUNITIES 18 LLC, 

ARC18FLD LLC, ARC18FLWHO LLC 

and ARC18FLSH LLC

Collectively, as Borrower,


 


and


 


CITIGROUP GLOBAL MARKETS REALTY CORP.


 

















 


TABLE OF CONTENTS


 


 


	
  ARTICLE I. CERTAIN DEFINITIONS

  	
   

  
	
  Section 1.1.

  	
  Definitions.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II. GENERAL TERMS

  	
   

  
	
  Section 2.1.

  	
  The Loan.

  	
   

  
	
  Section 2.2.

  	
  Use of
  Proceeds.

  	
   

  
	
  Section 2.3.

  	
  Security for
  the Loan.

  	
   

  
	
  Section 2.4.

  	
  Borrower’s
  Note.

  	
   

  
	
  Section 2.5.

  	
  Principal and
  Interest.

  	
   

  
	
  Section 2.6.

  	
  Voluntary
  Prepayment.

  	
   

  
	
  Section 2.7.

  	
  Mandatory
  Prepayment; Capital Events; Certain Transfers.

  	
   

  
	
  Section 2.8.

  	
  Application
  of Payments After Event of Default.

  	
   

  
	
  Section 2.9.

  	
  Method and
  Place of Payment

  	
   

  
	
  Section 2.10.

  	
  Taxes.

  	
   

  
	
  Section 2.11.

  	
  Release of
  Collateral.

  	
   

  
	
  Section 2.12.

  	
  Central
  Cash Management.

  	
   

  
	
  Section 2.13.

  	
  Reserve
  Accounts.

  	
   

  
	
  Section 2.14.

  	
  Additional
  Provisions Relating to the Pledged Accounts.

  	
   

  
	
  Section 2.15.

  	
  Security
  Agreement.

  	
   

  
	
  Section 2.16.

  	
  Mortgage
  Recording Taxes.

  	
   

  
	
  Section 2.17.

  	
  Extension
  Option.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III. CONDITIONS PRECEDENT

  	
   

  
	
  Section 3.1.

  	
  Conditions
  Precedent to Closing

  	
   

  
	
  Section 3.2.

  	
  Execution and
  Delivery of Agreement.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV. REPRESENTATIONS AND WARRANTIES

  	
   

  
	
  Section 4.1.

  	
  Representations
  and Warranties as to Borrower

  	
   

  
	
  Section 4.2.

  	
  Representations
  and Warranties as to the Mortgaged Property.

  	
   

  
	
  Section 4.3.

  	
  Survival of
  Representations.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V. AFFIRMATIVE COVENANTS

  	
   

  
	
  Section 5.1.

  	
  Affirmative
  Covenants

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI. NEGATIVE COVENANTS

  	
   

  
	
  Section 6.1.

  	
  Negative
  Covenants.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII. EVENT OF DEFAULT

  	
   

  
	
  Section 7.1.

  	
  Event of
  Default.

  	
   

  
	
  Section 7.2.

  	
  Remedies.

  	
   

  
	
  Section 7.3.

  	
  Remedies
  Cumulative.

  	
   

  
	
  Section 7.4.

  	
  Default
  Administration Fee.

  	
   

  
	
  Section 7.5.

  	
  Curative
  Advances

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII. SINGLE-PURPOSE,
  BANKRUPTCY-REMOTE REPRESENTATIONS, WARRANTIES AND COVENANTS

  	
   

  
	
  Section 8.1.

  	
  Applicable to
  Borrower

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX. MISCELLANEOUS

  	
   

  
	
  Section 9.1.

  	
  Survival.

  	
   

  



 


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  Section 9.2.

  	
  Lender’s
  Discretion.

  	
   

  
	
  Section 9.3.

  	
  Governing
  Law.

  	
   

  
	
  Section 9.4.

  	
  Modification,
  Waiver in Writing.

  	
   

  
	
  Section 9.5.

  	
  Delay Not a
  Waiver.

  	
   

  
	
  Section 9.6.

  	
  Notices.

  	
   

  
	
  Section 9.7.

  	
  TRIAL BY
  JURY.

  	
   

  
	
  Section 9.8.

  	
  Headings.

  	
   

  
	
  Section 9.9.

  	
  Assignment.

  	
   

  
	
  Section 9.10.

  	
  Severability.

  	
   

  
	
  Section 9.11.

  	
  Preferences.

  	
   

  
	
  Section 9.12.

  	
  Waiver of
  Notice.

  	
   

  
	
  Section 9.13.

  	
  Failure to
  Consent.

  	
   

  
	
  Section 9.14.

  	
  Schedules
  Incorporated.

  	
   

  
	
  Section 9.15.

  	
  Offsets,
  Counterclaims and Defenses.

  	
   

  
	
  Section 9.16.

  	
  No Joint
  Venture or Partnership.

  	
   

  
	
  Section 9.17.

  	
  Waiver of
  Marshalling of Assets Defense.

  	
   

  
	
  Section 9.18.

  	
  Waiver of
  Counterclaim.

  	
   

  
	
  Section 9.19.

  	
  Conflict;
  Construction of Documents.

  	
   

  
	
  Section 9.20.

  	
  Brokers and
  Financial Advisors.

  	
   

  
	
  Section 9.21.

  	
  Counterparts.

  	
   

  
	
  Section 9.22.

  	
  Estoppel
  Certificates.

  	
   

  
	
  Section 9.23.

  	
  Payment of
  Expenses.

  	
   

  
	
  Section 9.24.

  	
  Non-Recourse.

  	
   

  



 


SCHEDULES


 


	
  1

  	
  –

  	
  Immediate
  Repairs Reserved for in Deferred Maintenance Escrow Account

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2

  	
  –

  	
  Allocated Loan
  Amounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3

  	
  –

  	
  Homesites as of
  the Closing Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4

  	
  –

  	
  Exceptions to
  Representations and Warranties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5

  	
  –

  	
  Addresses for
  Notices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6

  	
  –

  	
  Work Reserve
  Funding Conditions for Deferred Maintenance Escrow Account

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7

  	
  –

  	
  Organizational
  Chart

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8

  	
  –

  	
  Form of
  Quarterly Statement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9

  	
  –

  	
  Form of Monthly
  Statement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10

  	
  –

  	
  Form of Standard
  Lease as of the Closing Date

  	
   

  



 


ii

















 


LOAN AGREEMENT


 


THIS LOAN AGREEMENT, made as of February 18, 2004, is
by and among ARC18TX LP, a Delaware limited partnership, and ARC COMMUNITIES 18
LLC, ARC18FLD LLC, ARC18FLWHO LLC and ARC18FLSH LLC, each a Delaware limited
liability company, on a joint and several basis, having an address at 600 Grant
Street, Suite 900, Denver, Colorado 80203 (collectively, “Borrower”) and
CITIGROUP GLOBAL MARKETS REALTY CORP., a New York corporation, having an
address at 388 Greenwich Street, 11th Floor, New York, New York
10013 (together with its successors and assigns, whether one or more, “Lender”).


 


RECITALS


 


WHEREAS, Borrower desires to obtain from Lender the
Loan in an amount equal to the Loan Amount (each as hereinafter defined) to,
with respect to certain of the Mortgaged Property (as hereinafter defined),
finance a portion of the acquisition cost of, and, with respect to other of the
Mortgaged Property, refinance existing debt at such Mortgaged Property and to
pay certain other fees and expenses;


 


WHEREAS, Lender is unwilling to make the Loan unless
Borrower executes and delivers this Agreement, the Note and the Loan Documents
(each as hereinafter defined) to which it is a party which shall establish the
terms and conditions of, and provide security for, the Loan; and


 


WHEREAS, Borrower has agreed to establish certain
accounts and to grant to Lender, a security interest therein upon the terms and
conditions of the security agreement set forth in Section 2.15.


 


NOW, THEREFORE, in consideration of the making of the
Loan by Lender and for other good and valuable consideration, the mutual
receipt and legal sufficiency of which are hereby acknowledged, the parties
hereby covenant, agree, represent and warrant as follows:


 


ARTICLE I.

CERTAIN DEFINITIONS


 


Section 1.1.            Definitions.


 


For all purposes of this Agreement:  (1) the capitalized terms defined in this Article
1 have the meanings assigned to them in this Article 1 and include
the plural as well as the singular; (2) all accounting terms have the meanings
assigned to them in accordance with GAAP (as hereinafter defined); (3) the
words “herein”, “hereof”, and “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular Article, Section,
or other subdivision; and (4) the following terms have the following meanings:


 


“Account Collateral” has the meaning set forth
in Section 2.15(a) hereof.


 


“Accounts” means all accounts (as defined in
the relevant UCC), now owned or hereafter acquired by Borrower, and arising out
of or in connection with, the operation of the Mortgaged Property and all other
accounts described in the Management Agreement and all present and future
accounts receivable, inventory accounts, chattel paper, notes, insurance
policies, Instruments, Documents or other rights to payment and all forms of
obligations owing at any time to Borrower thereunder, whether now existing or
hereafter created or otherwise acquired by or on behalf of Borrower, and all
Proceeds thereof and all liens, security interests, guaranties, remedies,
privileges and other rights pertaining thereto, and all rights and remedies of
any kind forming the subject matter of any of the foregoing.


 

















 


“Affiliate” of any specified Person means any
other Person (i) controlling or controlled by or under common control with such
specified Person; (ii) directly or indirectly owning or holding ten percent
(10%) or more of any equity interest in the first Person; or (iii) ten percent
(10%) or more of whose equity interests are directly or indirectly owned or
held by the first Person.  For the
purposes of this definition, “control” when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities or
other beneficial interests, by contract or otherwise; and the terms
“controlling” and “controlled” have the meanings correlative to the foregoing.


 


“Agreement” means this Loan Agreement, together
with the Schedules and Exhibits hereto, as the same may from time to time
hereafter be modified, supplemented or amended.


 


“Allocated Loan Amount” means the portion of
the Loan Amount allocated to each individual Mortgaged Property, as such
amounts may be adjusted by Lender from time to time as hereinafter set forth:


 


(i)            The initial Allocated Loan Amount
for each individual Mortgaged Property shall equal the amount set forth in
Schedule 2 attached hereto.


 


(ii)           Notwithstanding the foregoing, (a) in
the event during the initial twelve (12) months after the Closing Date or in
connection with the exercise of an Extension Option by the Borrower, Lender
requests and receives updated Appraisals indicating that the relative values of
the individual Mortgaged Property are inconsistent with their relative Allocated
Loan Amounts, Lender may one time during such twelve (12) month period or one
time in connection with each such Extension Option by notice to Borrower in
writing increase or decrease the Allocated Loan Amount of any or all of the
individual Mortgaged Property in accordance with such Appraisals to reflect
such relative values and (b) in the event Lender has not received an updated
Appraisal as aforesaid but the condition of one or more of the individual
Mortgaged Property shall have suffered a Material Adverse Effect since the most
recent Appraisal or Appraisal update, Lender may, increase or decrease the
Allocated Loan Amount of any or all of the individual Mortgaged Property as
appropriate to reflect such Material Adverse Effect, provided that any change
pursuant to the preceding clause (a) or (b) shall not change the aggregate
Allocated Loan Amount.


 


“Appraisal” means each appraisal with respect
to an individual Mortgaged Property prepared by an Appraiser in accordance with
the Uniform Standards of Professional Appraisal Practice of the Appraisal
Foundation, in compliance with the requirements of Title 11 of the Financial
Institution Reform, Recovery and Enforcement Act and utilizing customary
valuation methods such as the income, sales/market or cost approaches.


 


“Appraiser” means a nationally recognized MAI
appraiser selected by Borrower and reasonably approved by Lender.


 


“Approved Capital Expenditures” has the meaning
set forth in Section 2.13(a)(iii) hereof.


 


“Assignment of Rents and Leases” means, with
respect to the Mortgaged Property, an Assignment of Rents and Leases (and, if
there are more than one, each and every one of them), dated as of the Closing
Date, granted by Borrower to Lender with respect to the Leases, as same may
thereafter from time to time be supplemented, amended, modified or extended.


 


2

















 


“Assumed Loan Debt Service” means the product
of the Market Constant and the Principal Indebtedness.


 


“Basic Carrying Costs” means the following
costs with respect to the Mortgaged Property: 
(i) Impositions and (ii) insurance premiums for policies of insurance
required to be maintained by Borrower pursuant to this Agreement or the other
Loan Documents.


 


“Borrower” has the meaning provided in the
first paragraph of this Agreement.


 


“Borrower Release Price Contribution” means,
with respect to a Capital Event of an individual Mortgaged Property, the amount
required to be deposited into the Collection Account if the Release Price for
such individual Mortgaged Property shall be greater than the Capital Event
Proceeds received in connection with such Capital Event, which amount shall be
equal to the difference between such Release Price and such Capital Event
Proceeds.


 


“Business Day” means any day other than a
Saturday, a Sunday or a day on which commercial banks in the State of New York
are authorized or obligated by law, governmental decree or executive order to
be closed.  When used with respect to an
Interest Determination Date, “Business Day” shall mean any day other
than a Saturday, a Sunday or a day on which banks in London, England are closed
for interbank or foreign exchange transactions.


 


“Capital Event” means any transfer, sale,
assignment, conveyance, liquidation, disposition (other than a Taking) or
refinancing of all or any portion of a Mortgaged Property or any interest
therein and “Capital Events” shall have a meaning correlative to the
foregoing; provided, that the granting of an easement that benefits any
Mortgaged Property shall not constitute a Capital Event for purposes of this
Agreement.


 


“Capital Event Proceeds” means any cash
proceeds of a Capital Event received by Borrower net of any cash prorations,
adjustments and credits with respect to such Capital Event and net of reasonable
third-party expenses paid in connection with such Capital Event.


 


“Capital Improvement Costs” means costs
incurred or to be incurred in connection with replacements and capital repairs
made to the Mortgaged Property which would be capitalized in accordance with
GAAP.


 


“CERCLA” has the meaning set forth in Section 5.1(d)(i)
hereof.


 


“Chattel Paper” means all of Borrower’s right,
title and interest, whether now owned or hereafter acquired, in, to and under
all “chattel paper” as defined in the UCC (whether tangible chattel paper or
electronic chattel paper).


 


“Closing Date” means the date of the funding of
the Loan.


 


“Code” means the Internal Revenue Code of 1986,
as amended, and as it may be further amended from time to time, any successor
statutes thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.


 


“Collateral” means, collectively, the Land,
Improvements, Leases, Rents, Personalty, and all Proceeds, and (to the full
extent assignable) Permits, which is or hereafter may become subject to a Lien
in favor Lender as security for the Loan (whether pursuant to the Mortgages,
any other Loan Document or otherwise), all whether now owned or hereafter
acquired and all other property which is or


 


3

















 


hereafter may
become subject to a Lien in favor Lender as security for the Loan and including
all property of any kind described as part of the Mortgaged Property under any
of the Mortgages.


 


“Collateral Assignment of Hedge” means the
Collateral Assignment of Hedge, dated as of the applicable date and executed by
Borrower, Lender and the hedge counterparty.


 


“Collateral Security Instrument” means any
right, document or instrument, other than the Mortgages, given as security for
the Loan, including, without limitation, the Collateral Assignment of Hedge,
the Contract Assignment and the Pledge Agreement.


 


“Collection Account” has the meaning set forth
in Section 2.12(a) hereof.


 


“Collection Account Agreement” means the
Collection Account Agreement, dated as of the applicable date and executed by
Borrower, Lender and the Collection Account Bank, relating to the Collection
Account and the Reserve Accounts and any other accounts maintained with the
Collection Account Bank.


 


“Collection Account Bank” means Key Bank, or
any successor financial institution appointed by Lender.


 


“Collection Period” means, with respect to any
Payment Date, the period commencing on and including the eleventh (11th) day in
the month preceding the month in which such Payment Date occurs through and
including the tenth (10th) day in the month in which such Payment Date occurs; provided,
however, that in the case of the first Payment Date, the “Collection
Period” shall commence on the Closing Date.


 


“Commitment” means the Commitment dated
December 31, 2003 entered into by Affordable Residential Communities, LP,
Citigroup Global Markets Realty Corp. and Merrill Lynch Mortgage Lending, Inc.
with respect to the Loan.


 


“Condemnation Proceeds” means, in the event of
a Taking with respect to the Mortgaged Property, the proceeds in respect of
such Taking less any reasonable third party out-of-pocket expenses incurred in
prosecuting the claim for and otherwise collecting such proceeds.


 


“Contest” has the meaning set forth in Section 9.24(D)(1)
hereof.


 


“Contingent Obligation” means, as used in the
definition of Other Borrowings, without duplication, any obligation of Borrower
guaranteeing any indebtedness, leases, dividends or other obligations (“primary
obligations”) of any other Person (the “primary obligor”) in any
manner, whether directly or indirectly. 
Without limiting the generality of the foregoing, the term “Contingent
Obligation” shall include any obligation of Borrower:


 


(i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor;


 


(ii) to
advance or supply funds (x) for the purchase or payment of any such primary
obligation or (y) to maintain working capital or equity capital of the primary
obligor;


 


(iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation; or


 


4

















 


(iv)  otherwise to assure or hold harmless the
holder of such primary obligation against loss in respect thereof.


 


The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming Borrower is required to perform thereunder) as determined by
Lender in good faith.


 


“Contract Assignment” means, with respect to
the Mortgaged Property, the Assignment of Contracts, Licenses, Permits,
Agreements, Warranties and Approvals, dated as of the Closing Date and executed
by Borrower.


 


“Contracts” means the Management Agreement and
all other agreements to which Borrower is a party or which are assigned to
Borrower by the Manager in the Management Agreement and which are executed in
connection with the construction, operation and management of the Mortgaged
Property (including, without limitation, agreements for the sale, lease or
exchange of goods or other property and/or the performance of services by it,
in each case whether now in existence or hereafter arising or acquired) as any
such agreements have been or may be from time to time amended, supplemented or
otherwise modified.


 


“Debt Service Coverage Ratio” means, as of any
date of calculation with respect to the Mortgaged Property, the quotient
expressed to two decimal places of the Underwritten Net Cash Flow divided by
the Assumed Loan Debt Service.


 


“Debt Service Coverage Test” means, (x) as of
the Closing Date and as of any date of reunderwriting selected by Lender
pursuant to the Side Agreement, a test which shall be satisfied if the
Underwritten Net Cash Flow is at least equal to the product of 1.16 and the
Assumed Loan Debt Service and (y) as of any date of calculation after the
Closing Date (other than in connection with a reunderwriting by the Lender
pursuant to the Side Agreement), a test which shall be satisfied if the
Underwritten Net Cash Flow is at least equal to the product of 1.25 and the
Assumed Loan Debt Service.


 


“Debt Service Reserve Account” has the meaning
set forth in Section 2.13(c).


 


“Deed of Trust Trustee” means the trustee under
any Mortgage that constitutes a “deed of trust” under applicable law.


 


“Default” means the occurrence of any event
which, but for the giving of notice or the passage of time, or both, would be
an Event of Default.


 


“Default Administration Fee” means an amount
equal to the product of (x) 1% and (y) the Principal Indebtedness as of
the date the Default Administration Fee becomes payable; provided, that
any Exit Fee paid by the Borrower shall be credited against the Borrower’s
obligation to pay the Default Administration Fee.


 


“Default Rate” means the per annum interest
rate equal to the lesser of (a) 5.0% per annum in excess of the rate otherwise
applicable hereunder and (b) the maximum rate allowable by applicable law.


 


“Deferred Maintenance Escrow Account” has the
meaning set forth in Section 2.13(a).


 


5

















 


“Deposit Account” means all of Borrower’s
right, title and interest, whether now owned or hereafter acquired, in, to and
under all “deposit accounts” as defined in the UCC.


 


“Disclosure Certificate” has the meaning set
forth in Section 5.1(w) hereof.


 


“Disclosure Documents” has the meaning set
forth in Section 5.1(w) hereof.


 


“Documents” means all of Borrower’s right,
title and interest, whether now owned or hereafter acquired, in, to and under
all “documents” as defined in the UCC (whether negotiable or non-negotiable) or
other receipts covering, evidencing or representing goods.


 


“EO13224” has the meaning set forth in Section 4.1(v)
hereof.


 


“Eligible Account” means a separate and identifiable
account from all other funds held by the holding institution, which account is
either (i) an account maintained with a federal or state chartered depository
institution or trust company that (A) satisfies the Rating Criteria and (B)
insures the deposits made to such account through the Federal Deposit Insurance
Corporation, or (ii) a segregated trust account maintained with the corporate
trust department of a federal or state chartered depository institution or
trust company subject to regulations regarding fiduciary funds on deposit
similar to Title 12 of the Code of Federal Regulations Section 9.10(b)
which, in either case, has corporate trust powers, acting in its fiduciary
capacity and in either case having combined capital and surplus of at least
$100,000,000 or otherwise acceptable to the Rating Agencies.  An Eligible Account shall not be evidenced
by a certificate of deposit, passbook, other instrument or any other physical
indicia of ownership.  Following a
downgrade below the Rating Criteria, withdrawal, qualification or suspension of
such institution’s rating, each account must at Lender’s request promptly (and
in any case within not more than thirty (30) calendar days) be moved to a
qualifying institution or to one or more segregated trust accounts in the trust
department of such institution, if permitted.


 


“Engineer” means an Independent Engineer
selected by Borrower and reasonably approved by Lender.


 


“Environmental Auditor” means an Independent
environmental auditor selected by Borrower and reasonably approved by Lender.


 


“Environmental Claim” means any notice,
notification, request for information, claim, administrative, regulatory or
judicial action, suit, judgment, demand or other written communication (whether
written or oral) by any Person or Governmental Authority alleging or asserting
liability with respect to Borrower or any Mortgaged Property (whether for
damages, contribution, indemnification, cost recovery, compensation, injunctive
relief, investigatory, response, remedial or cleanup costs, damages to natural
resources, personal injuries, fines or penalties) arising out of, based on or
resulting from (i) the presence, Use or Release into the environment of any
Hazardous Substance at any location (whether or not owned, managed or operated
by Borrower) that affects Borrower or any Mortgaged Property, (ii) any fact,
circumstance, condition or occurrence forming the basis of any violation, or
alleged violation, of any Environmental Law or (iii) any alleged injury or
threat of injury to human health, safety or the environment.


 


“Environmental Indemnity Agreement” means the
Environmental Indemnity Agreement dated as of the Closing Date, from Borrower
and the Guarantor, collectively, as indemnitor, to Lender, as indemnitee, as
the same may be amended, modified or supplemented from time to time.


 


6

















 


“Environmental Laws” means any and all present
and future federal, state or local laws, statutes, ordinances, rules or
regulations, or any judicial interpretation thereof, any judicial or
administrative orders, decrees or judgments thereunder issued by a Governmental
Authority, and any permits, approvals, licenses, registrations, filings and
authorizations, in each case as now or hereafter in effect, relating to the
environment, human health or safety, or the Release or threatened Release of
Hazardous Substances or otherwise relating to the Use of Hazardous Substances.


 


“Environmental Reports” means each and every
“Phase I Environmental Site Assessment” (and, if applicable, “Phase II
Environment Site Assessment”) as referred to in the ASTM Standards on
Environmental Site Assessments for Commercial Real Estate, E 1527-2000 and an
asbestos survey, with respect to each Mortgaged Property, prepared by one or
more Environmental Auditors and delivered to Lender and any amendments or
supplements thereto delivered to Lender.


 


“Equipment” means all of Borrower’s right,
title and interest, whether now owned or hereafter acquired, in, to and under
(i) all “equipment” as defined in the UCC, and (ii) all of the following
(regardless of how classified under the UCC): 
all building materials, construction materials, personal property
constituting furniture, fittings, appliances, apparatus, leasehold
improvements, machinery, devices, interior improvements, appurtenances,
equipment, plant, furnishings, fixtures, computers, electronic data processing
equipment, telecommunications equipment and other fixed assets now owned or
hereafter acquired by Borrower, and all Proceeds of (i) and (ii) as well as all
additions to, substitutions for, replacements of or accessions to any of the
items recited as aforesaid and all attachments, components, parts (including
spare parts) and accessories, whether installed thereon or affixed thereto, all
regardless of whether the same are located on any Mortgaged Property or are
located elsewhere (including, without limitation, in warehouses or other
storage facilities or in the possession of or on the premises of a bailee,
vendor or manufacturer) for purposes of manufacture, storage, fabrication or
transportation and all extensions and replacements to, and proceeds of, any of
the foregoing.


 


“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the regulations
promulgated thereunder. 
Section references to ERISA are to ERISA, as in effect at the date
of this Agreement and, as of the relevant date, any subsequent provisions of
ERISA, amendatory thereof, supplemental thereto or substituted therefor.


 


“ERISA Affiliate” means any corporation or
trade or business that is a member of any group of organizations (i) described
in Section 414(b) or (c) of the Code of which Borrower is a member and
(ii) solely for purposes of potential liability under Section 302(c)(11)
of ERISA and Section 412(c)(11) of the Code and the lien created under
Section 302(f) of ERISA and Section 412(n) of the Code, described in
Section 414(m) or (o) of the Code of which Borrower is a member.


 


“Event of Default” has the meaning set forth in
Section 7.1 hereof.


 


“Exit Fee” means 0.50% of the outstanding
Principal Indebtedness prepaid or repaid at any time (including the Maturity
Date); provided, however, that notwithstanding the foregoing, in
the event the initial Lender or an Affiliate of the initial Lender provides the
funds for a refinancing, then the Exit Fee shall be reduced by an amount equal
to 0.50% of the principal amount of any first mortgage loan(s) provided by
Lender in connection therewith.


 


“Extension Conditions,” “Extension Fee,”
“Extension Notice,” and “Extension Option” have the respective
meanings set forth in Section 2.17(a) hereof.


 


“Final Maturity Date” has the meaning set forth
in Section 2.17(a) hereof.


 


7

















 


“First Extended Maturity Date” has the meaning
set forth in Section 2.17(a) hereof.


 


“Fiscal Year” means the 12-month period ending
on December 31st of each year (or, in the case of the first fiscal year, such
shorter period from the Closing Date through such date) or such other fiscal
year of Borrower as Borrower may select from time to time with the prior
consent of Lender.


 


“Fitch” means Fitch, Inc. and its successors.


 


“Foreign Lender” has the meaning set forth in Section 2.10(b)
hereof.


 


“Fund” has the meaning set forth in the
definition of “Permitted Investments”.


 


“Funding Losses” has the meaning set forth in Section 2.5(e)
hereof.


 


“Funding Party” means any bank or other entity,
if any, which is indirectly or directly funding Lender with respect to the Loan,
in whole or in part, including, without limitation, any direct assignee of the
Loan (but excluding any investors in any securities issued in connection with a
Secondary Market Transaction with respect to the Loan).


 


“GAAP” means generally accepted accounting
principles in the United States of America as of the date of the applicable
financial report, consistently applied.


 


“General Intangibles” means all of Borrower’s
right, title and interest, whether now owned or hereafter acquired, in, to and
under (i) all “general intangibles” as defined in the relevant UCC, now owned
or hereafter acquired by Borrower and (ii) all of the following
(regardless of how characterized):  all
agreements, covenants, restrictions or encumbrances affecting the Mortgaged
Property or any part thereof.


 


“General Partner” means, with respect to the
entity comprising the Borrower that is a Delaware limited partnership,
ARC18TXGP LLC, a Delaware limited liability company.


 


“Governmental Authority” means any nation or
government, any state, county, municipality or other political subdivision
thereof or any governmental body, agency, authority, department or commission
(including, without limitation, any taxing authority) or any instrumentality or
officer of any of the foregoing (including, without limitation, any court or
tribunal) exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any corporation,
partnership or other entity directly or indirectly owned or controlled by the
foregoing.


 


“Gross Revenue” means, for any period, the
total dollar amount of all income and receipts received by, or for the account
of, Borrower in the ordinary course of business with respect to the Mortgaged
Property, but excluding Loss Proceeds (other than the proceeds of business
interruption insurance or the proceeds of a temporary Taking in lieu of Rents
which shall be included in Gross Revenue).


 


“Guarantor” means Affordable Residential
Communities Inc., a Maryland corporation, and Affordable Residential
Communities LP, a Delaware limited partnership, on a joint and several basis.


 


“Guaranty of Nonrecourse Obligations” means,
with respect to the Loan, the Guaranty of Nonrecourse Obligations guaranteeing
the exceptions to the nonrecourse provisions of the Loan Documents for which
liability is retained as described in Section 9.24 hereof from the
Guarantor to Lender.


 


8

















 


“Hazardous Substance” means, collectively, (i)
any petroleum or petroleum products or waste oils, explosives, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls (“PCBs”), lead in drinking water, lead-based paint and radon,
(ii) any chemicals or other materials or substances which are now or hereafter
become defined as or included in the definitions of “hazardous substances”,
“hazardous wastes”, “hazardous materials”, “extremely hazardous wastes”,
“restricted hazardous wastes”, “toxic substances”, “toxic pollutants”,
“contaminants”, “pollutants” or words of similar import under any Environmental
Law and (iii) any other chemical or any other hazardous material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under
any Environmental Law.


 


“Homesites” means, with respect to each
Mortgaged Property, the manufactured housing sites located thereon which are
capable of being leased to a Person to accommodate a manufactured or mobile
home, the number of each of which is set forth on Schedule 3 attached
hereto, as such number may be updated from time to time with the mutual written
agreement of Lender and Borrower.  Such
schedule shall include a breakdown of manufactured housing sites that are
capable of accommodating single and double wide manufactured homes, to the extent
such information is reasonably available to the Borrower.


 


 “Immediate
Repairs” has the meaning set forth in Section 2.13(a)(ii)
hereof.


 


“Impositions” means all taxes (including,
without limitation, all real estate, ad valorem, sales (including those imposed
on lease rentals), use, single business, gross receipts, value added,
intangible transaction privilege, privilege or license or similar taxes),
assessments (including, without limitation, all assessments for public
improvements or benefits, whether or not commenced or completed within the term
of the Loan), ground rents, water, sewer or other rents and charges, excises,
levies, governmental fees (including, without limitation, license, permit,
inspection, authorization and similar fees), and all other governmental
charges, in each case whether general or special, ordinary or extraordinary,
foreseen or unforeseen, in respect of each Mortgaged Property (including all
interest and penalties thereon), accruing during or in respect of the term
hereof and which may be assessed against or imposed on or in respect of or be a
Lien upon (1) Borrower (including, without limitation, all income, franchise,
single business or other taxes imposed on Borrower for the privilege of doing
business in the jurisdiction in which each Mortgaged Property, or any other
collateral delivered or pledged to Lender in connection with the Loan, is
located) or Lender, or (2) any Mortgaged Property, or any other collateral
delivered or pledged to Lender in connection with the Loan, or any part thereof
or any Rents therefrom or any estate, right, title or interest therein, or (3)
any occupancy, operation, use or possession of, or sales from, or activity
conducted on, or in connection with any Mortgaged Property or the leasing or
use of any Mortgaged Property or any part thereof, or the acquisition or
financing of the acquisition of any Mortgaged Property by Borrower.


 


“Improvements” means all buildings, structures,
fixtures and improvements now or hereafter owned by Borrower of every nature
whatsoever situated on any Land constituting part of the Mortgaged Property
(including, without limitation, all gas and electric fixtures, radiators,
heaters, engines and machinery, boilers, ranges, elevators and motors, plumbing
and heating fixtures, carpeting and other floor coverings, water heaters,
awnings and storm sashes, and cleaning apparatus which are or shall be affixed
to the Land or said buildings, structures or improvements and including any
additions, enlargements, extensions, modifications, repairs or replacements
thereto).


 


“Indebtedness” means the Principal
Indebtedness, together with all other obligations and liabilities due or to
become due to Lender pursuant hereto, under the Note or in accordance with any
of the other Loan Documents, and all other amounts, sums and expenses paid by
or payable to Lender hereunder or pursuant to the Note or any of the other Loan
Documents.


 


9

















 


“Indemnified Parties” has the meaning set forth
in Section 5.1(i).


 


“Independent” means, when used with respect to
any Person, a Person that (i) does not have any direct financial interest or
any material indirect financial interest in Borrower or in any Affiliate of
Borrower, (ii) is not connected with Borrower or any Affiliate of Borrower as
an officer, employee, trustee, partner, director or person performing similar
functions, and (iii) is not a member of the immediate family of any Person
described in clauses (i) or (ii).


 


“Independent Manager” has the meaning set forth
in Section 8.1(ee).


 


“Index Maturity” has the meaning set forth in
the definition of LIBOR.


 


“Instruments” means all of Borrower’s right,
title and interest, whether now owned or hereafter acquired, in, to and under
all “instruments” as defined in the UCC.


 


“Insurance Escrow Account” has the meaning set
forth in Section 2.13(b).


 


“Insurance Premiums” has the meaning set forth
in Section 5.1(x)(iii).


 


“Insurance Proceeds” means, in the event of a
casualty with respect to the Mortgaged Property, the proceeds received under
any insurance policy applicable thereto.


 


“Insurance Requirements” means all material
terms of any insurance policy required pursuant to this Agreement or any of the
Mortgages and all material regulations, rules and other requirements of the
National Board of Fire Underwriters or such other body exercising similar
functions applicable to or affecting the Mortgaged Property or any part thereof
or any use or condition thereof.


 


“Insured Casualty” has the meaning set forth in
Section 5.1(x)(iv)(B).


 


“Intellectual Property” means all of Borrower’s
right, title and interest, whether now owned or hereafter acquired, in, to and
under the trademark licenses, trademarks, rights in intellectual property,
trade names, service marks and copyrights, copyright licenses, patents, patent
licenses or the license to use intellectual property such as computer software
owned or licensed by Borrower or other proprietary business information
relating to Borrower’s policies, procedures, manuals and trade secrets.


 


“Interest Accrual Period” means, in connection
with the calculation of interest accrued with respect to any Payment Date, the
period commencing on and including the eleventh (11th) day in the month
preceding the month in which such Payment Date occurs through and including the
tenth (10th) day in the month in which such Payment Date occurs; provided,
however, that the first Interest Accrual Period for the Loan shall
commence on the Closing Date.


 


“Interest Determination Date” means, in
connection with the calculation of interest to accrue for any Interest Accrual
Period, the second Business Day preceding the fifteenth (15th) day of the month
in which such Interest Accrual Period commences; provided, however,
that the first Interest Determination Date for the Loan shall be the second
Business Day preceding the Closing Date.


 


“Interested Parties” has the meaning set forth
in Section 5.1(w) hereof.


 


“Inventory” means all of Borrower’s right,
title and interest, whether now owned or hereafter acquired, in, to and under
all “inventory” as defined in the UCC and shall include all Documents
representing the same.


 


10

















 


“Investment Property” means all of Borrower’s
right, title and interest, whether now owned or hereafter acquired, in, to and
under all “investment property” as defined in the UCC.


 


“IRS” has the meaning provided in Section 2.10(b)
hereof.


 


“Land” means the parcels of real estate
described on Exhibit A attached to the Mortgages and made a part hereof.


 


“Laundry Leases” has the meaning provided in Section 5.1(dd)
hereof.


 


“Leases” means all leases, subleases, lettings,
occupancy agreements, tenancies and licenses by Borrower as landlord of the
Mortgaged Property or any part thereof now or hereafter entered into, and all
amendments, extensions, renewals and guarantees thereof, and all security
therefor.


 


“Leasing Commissions” means leasing commissions
incurred by Borrower in connection with leasing any Mortgaged Property or any
portion thereof (including renewals of existing Leases).


 


“Legal Requirements” means all governmental
statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and
injunctions of Governmental Authorities (including, without limitation, any of
the foregoing relating to zoning, parking or land use, any and all
Environmental Laws and the Americans with Disabilities Act) affecting Borrower
or any Mortgaged Property or any part thereof or the construction, use,
alteration or operation thereof, or any part thereof (whether now or hereafter
enacted and in force), and all permits, licenses and authorizations and
regulations relating thereto, and all covenants, agreements, restrictions and
encumbrances contained in any instruments, at any time in force affecting the
Mortgaged Property or any part thereof or any utility services or septic
systems or other infrastructure serving any portion of the Mortgaged Property
(including, without limitation, any which may (i) require repairs,
modifications or alterations in or to the Mortgaged Property or any part
thereof or any utility services or septic systems or other infrastructure
serving any portion of the Mortgaged Property, or (ii) in any way limit
the use and enjoyment thereof).


 


“Lender” has the meaning provided in the first
paragraph of this Agreement.


 


“Lender’s Terms” has the meaning provided in Section 5.1(v).


 


“Letter of Credit Rights” means all of
Borrower’s right, title and interest, whether now owned or hereafter acquired,
in, to and under all “letter of credit rights” as defined in the UCC.


 


“LIBOR” means the rate per annum calculated as
set forth below:


 


(i)            On each Interest Determination Date,
LIBOR will be determined on the basis of the offered rate for deposits of not
less than U.S. $1,000,000 for a period of one month (the “Index Maturity”),
commencing on such Interest Determination Date, which appears on Dow Jones
Market Service (formerly Telerate) Page 3750 as of 11:00 a.m., London time (or
such other page as may replace the Dow Jones Market Service (formerly Telerate)
Page on that service for the purposes of displaying London interbank offered
rates of major banks).  If no such
offered rate appears, LIBOR with respect to the relevant Interest Accrual
Period will be determined as described in (ii) below.


 


(ii)           With respect to an Interest
Determination Date on which no such offered rate appears on Dow Jones Market
Service (formerly Telerate) Page 3750 as described in (i) above, LIBOR shall be
the arithmetic mean, expressed as a percentage, of the offered rates for deposits


 


11

















 


in U.S. dollars
for the Index Maturity which appears on the Reuters Screen LIBO Page as of
11:00 a.m., London time, on such date. 
If, in turn, such rate is not displayed on the Reuters Screen LIBO Page
at such time, then LIBOR for such date will be obtained from the preceding
Business Day for which the Reuters Screen LIBO Page displayed a rate for the
Index Maturity.


 


(iii)          If on any Interest Determination Date,
Lender is required but unable to determine LIBOR in the manner provided in
paragraphs (i) and (ii) above, LIBOR for the next Interest Accrual Period shall
be the rate at which U.S. dollar deposits approximately equal to the principal
amount of the Loan having a 30-day term are offered by the principal London
office of a leading “money center” bank active in the London interbank market
for U.S. dollar deposits, as determined by Lender in its sole discretion, in
immediately available funds in the London interbank market on the Determination
Date.  LIBOR for any Interest Accrual
Period shall be adjusted from time to time, by increasing the rate thereof to
compensate Lender and any Funding Party for any aggregate reserve requirements
(including, without limitation, all basic, supplemental, marginal and other
reserve requirements and taking into account any transitional adjustments or
other scheduled changes in reserve requirements during any Interest Accrual
Period) which are required to be maintained by Lender or such Funding Party
with respect to “Eurocurrency liabilities” (as presently defined in Regulation
D of the Board of Governors of the Federal Reserve System) of the same term
under Regulation D, or any other regulations of a Governmental Authority having
jurisdiction over Lender or such Funding Party of similar effect.  Notwithstanding the foregoing, if the
interest rate for Lender or any Funding Party shall be increased in respect of
reserve requirements as provided in the immediately preceding sentence, Lender
or such Funding Party shall promptly notify Borrower in writing upon becoming
aware that Borrower may be required to make the foregoing compensation to
Lender or such Funding Party.  Lender or
any Funding Party that gives notice as provided herein shall promptly withdraw
such notice (by notice to Borrower) whenever Lender or such Funding Party is no
longer required to maintain such reserves or the circumstances giving rise to
such notice shall otherwise cease. 
Notwithstanding the foregoing, Borrower shall not be required to pay any
increased amounts required by the third sentence of this definition to the
extent that Lender or the relevant Funding Party shall be compensated or
reimbursed hereunder for such amounts. 
The establishment of the LIBOR on each Interest Determination Date by Lender
and Lender’s calculation of the rate of interest applicable to the Note shall
(in the absence of manifest error) be final and binding.


 


All percentages resulting from any calculations of
LIBOR referred to in this Agreement will be carried out to five decimal places
and all U.S. dollar amounts used in or resulting from such calculations will be
rounded upwards to the nearest cent.


 


“Lien” means any mortgage, deed of trust, lien
(statutory or other), pledge, hypothecation, assignment, security interest, or
any other encumbrance or charge on or affecting Borrower or any Mortgaged
Property or any portion thereof, or any interest therein (including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and mechanic’s, materialmen’s and other similar liens and
encumbrances).


 


“Loan” means the loan made by Lender to
Borrower pursuant to the terms of this Agreement.


 


“Loan Amount” means an amount equal to
$92,147,861.


 


“Loan Documents” means this Agreement, the
Note, the Contract Assignment, the Management Agreement, the Manager’s
Subordination, the Mortgages, the Assignments of Rents and


 


12

















 


Leases, the Pledge
Agreement, the Environmental Indemnity Agreement, the Guaranty of Non-Recourse
Obligations, the Collateral Assignment of Hedge, the Side Agreement and all
other agreements, instruments, certificates and documents delivered by or on
behalf of Borrower or an Affiliate of Borrower to evidence or secure the Loan
as same may be amended or modified from time to time.


 


“Local Collection Account” and “Local
Collection Account Bank” have the meanings set forth in Section 2.12(a).


 


“Local Collection Account Agreement” means with
respect to the Local Collection Account, the lockbox agreement, dated as of the
applicable date and executed by Borrower, Lender and the Local Collection
Account Bank.


 


“Loss Proceeds” means Condemnation Proceeds
and/or Insurance Proceeds.


 


“Loss Proceeds Account” has the meaning set
forth in Section 2.12(f) hereof.


 


“Losses” has the meaning set forth in Section 5.1(j).


 


“Management Agreement” means with respect to
any Mortgaged Property, the property management agreement entered into between
Borrower and the Manager, in such form as may be reasonably approved by Lender,
as such agreement may be amended, modified or supplemented in accordance with
the terms and conditions hereof from time to time, and any management agreement
which may hereafter be entered into with respect to any Mortgaged Property in
accordance with the terms and conditions hereof, as the same may be amended,
modified or supplemented in accordance with the terms and conditions hereof
from time to time.


 


“Manager” means ARC Management Services, Inc.,
a Delaware corporation, the current manager of the Mortgaged Property under the
current Management Agreement, or such other Person as may hereafter be charged
with management of any Mortgaged Property pursuant to a Management Agreement
entered into in accordance with the terms and conditions hereof.


 


“Manager’s Subordination” means, with respect
to each Mortgaged Property, initially the Manager’s Consent and Subordination
of Management Agreement, executed by the Manager, Borrower and Lender, dated as
of the Closing Date, and in the event a successor or assignee Manager is
engaged at any Mortgaged Property, a subordination agreement executed by
Manager, Borrower and Lender in form and substance satisfactory to Lender, whereby,
among other things, the Management Agreement is subordinated to the
Indebtedness and to the Lien of the Mortgages so long as the Loan remains
outstanding.


 


“Market Constant” means the highest of (a) the
current annual interest rate on the Loan adjusted to reflect amortization on a
thirty (30) year schedule, (b) 7.50% and (c) the Treasury Rate plus 200 basis
points adjusted to reflect amortization on a thirty (30) year schedule.


 


“Master Homesite Lease Agreement” means, with
respect to each legal entity comprising the Borrower, the related Master
Homesite Lease Agreement, dated as of February 18, 2004, by and between ARC
Housing, LLC (or with respect to any Mortgaged Property located in Texas, ARC
Housing TX LP, a Delaware limited partnership) and such entity comprising the
Borrower.


 


“Master Lease Deposits” means the security
deposits under all of the Master Homesite Lease Agreements.


 


13

















 


“Master Lease Deposit Account” has the meaning
set forth in Section 2.12(a)(i).


 


“Material Adverse Effect” means a material
adverse effect upon (i) the business operations, properties, assets or
condition (financial or otherwise) of Borrower, (ii) the ability of Borrower to
perform, or of Lender to enforce, any of the Loan Documents or (iii) the
aggregate value of the Mortgaged Property.


 


“Maturity Date” means the earlier of (a) the
Original Maturity Date (i.e. the Payment Date in February, 2006 or if
Borrower exercises the Extension Option pursuant to Section 2.17,
the First Extended Maturity Date, the Second Extended Maturity Date or the
Final Maturity Date, as applicable, or (b) such earlier date on which the
entire Loan is required to be paid in full, by acceleration or otherwise under
this Agreement or any of the other Loan Documents.


 


“Maximum Rate” has the meaning set forth in Section 2.5(i)
hereof.


 


“Member” means ARC Real Estate Holdings, LLC, a
Delaware limited liability company.


 


“Moody’s” means Moody’s Investors Services,
Inc. and its successors.


 


“Money” means all of Borrower’s right, title
and interest, whether now owned or hereafter acquired, in, to and under (i) all
“money” as defined in the UCC and (ii) all moneys, cash, or other items of
legal tender generated from the use or operation of the Mortgaged Property.


 


“Monthly Statement” has the meaning provided in
Section 2.12(d).


 


“Mortgage” means, with respect to the Mortgaged
Property, a first priority Mortgage or Deed of Trust (as applicable),
Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as
of the Closing Date (and, if there are more than one, each and every one of
them), granted by Borrower to or for the benefit of Lender or Deed of Trust
Trustee for the benefit of Lender, respectively, with respect to the Mortgaged
Property as security for the Loan, as same may thereafter from time to time be
supplemented, amended, modified or extended by one or more agreements
supplemental thereto.


 


“Mortgaged Property” means, at any time,
individually or collectively, as applicable, the Land, the Improvements, the
Personalty, the Leases and the Rents, and all rights, titles, interests and
estates appurtenant thereto, encumbered by, and more particularly described in,
each of the Mortgages.


 


“Multiemployer Plan” means a multiemployer plan
defined as such in Section 3(37) of ERISA and which is covered by Title IV
of ERISA (i) to which contributions have been, or were required to have been
made by Borrower or any ERISA Affiliate within the past six years or (ii) with
respect to which Borrower could reasonably be expected to incur liability.


 


“Net Proceeds” means either (x) the purchase
price (at foreclosure or otherwise) actually received by Lender from a third
party purchaser with respect to any Mortgaged Property, as a result of the
exercise by Lender of its rights, powers, privileges and other remedies after
the occurrence of an Event of Default or (y) in the event that Lender (or its
nominee) is the purchaser at foreclosure of any Mortgaged Property, the higher
of (i) the amount of Lender’s credit bid or (ii) such amount as shall be
determined in accordance with applicable law, and in either case minus all
reasonable third party, out of pocket costs and expenses (including, without
limitation, all attorneys’ fees and disbursements and any brokerage fees, if
applicable) incurred by Lender (and its nominee, if applicable) in connection
with the exercise of such remedies; provided, however, that such
costs and expenses shall not be deducted to the extent such


 


14

















 


amounts previously
have been added to the Indebtedness in accordance with the terms of the Loan
Documents or applicable law.


 


“Note” means one or more promissory notes made
by Borrower to Lender pursuant to this Agreement, as such note may be modified,
amended, supplemented, restated or extended, and any replacement notes
therefor.


 


“O&M Program” has the meaning set forth in Section 5.1(d)(iv)
hereof.


 


“OFAC” has the meaning set forth in Section 4.1(v)
hereof.


 


“Officer’s Certificate” means a certificate
delivered to Lender by Borrower which is signed by an authorized officer of
Borrower.


 


“Operating Budget” means, with respect to any
Fiscal Year, the operating budget for the Mortgaged Property reflecting
Borrower’s projections of Gross Revenues and Property Expenses for the
Mortgaged Property for such Fiscal Year and on an annual and monthly basis and
submitted by Borrower to Lender in accordance with the provisions of Section 5.1(r)(viii),
which Operating Budget shall include, as a component thereof, a Working Capital
Budget.


 


“Operating Expense Account” has the meaning
provided in Section 2.13(c).


 


“Operating Expenses” means, for any period of
calculation, all expenditures incurred and required to be expensed under GAAP
during such period in connection with the ownership, operation, maintenance,
repair and/or leasing of the Mortgaged Property, including without limitation
(or duplication) Property Expenses. 
Notwithstanding the foregoing, Operating Expenses shall not include
(a) Capital Improvement Costs, (b) any extraordinary items (unless Lender
and Borrower approve of the inclusion of such items as Operating Expenses), (c)
depreciation, amortization and other non-cash charges or (d) any payments of
principal or interest on the Indebtedness or otherwise payable to the holder of
the Indebtedness.  Operating Expenses
shall be calculated on the accrual basis of accounting.


 


“Operating Revenues” means, for any period, all
regular ongoing income during such period from the operation of the Mortgaged
Property that, in accordance with GAAP, is included in annual financial
statements as revenue.  Notwithstanding
the foregoing, Operating Revenues shall not include (a) any Loss Proceeds
(other than business interruption proceeds or Condemnation Proceeds in connection
with a temporary Taking and, in either case, only to the extent allocable to
such period or other applicable reporting period), (b) any proceeds
resulting from the sale, exchange, transfer, financing or refinancing of the
Mortgaged Property, (c) any Rent attributable to a Lease more than one
month prior to the date on which the actual payment of Rent is required to be
made thereunder, (d) any interest income from any source, (e) any
proceeds paid to the Collection Account by the interest rate cap counterparty
in connection with the interest rate cap entered into pursuant hereto, or (f)
any other extraordinary items as reasonably determined by Lender.  Operating Revenues shall be calculated on
the accrual basis of accounting.


 


“Organizational Agreements” means, individually
or collectively, (i) the certificate of formation and operating agreement, (ii)
the certificate of limited partnership and partnership agreement, (iii) the
certificate of incorporation and by-laws or (iv) the trust agreement or other
organizational documents, as applicable of any Person, each as amended or
restated from time to time.


 


“Original Maturity Date” means the Payment Date
occurring in February, 2006.


 


15

















 


“Origination Fee” means 1.0% of the Loan Amount
payable to Lender on the Closing Date.


 


“Other Borrowings” means, with respect to
Borrower, without duplication (but not including the Indebtedness or any
interest rate protection agreement entered into pursuant hereto) (i) all
indebtedness of Borrower for borrowed money or for the deferred purchase price
of property or services, (ii) all indebtedness of Borrower evidenced by a note,
bond, debenture or similar instrument, (iii) the face amount of all letters of
credit issued for the account of Borrower and, without duplication, all
unreimbursed amounts drawn thereunder, and obligations evidenced by bankers’
acceptances, (iv) all indebtedness of Borrower secured by a Lien on any
property owned by Borrower (whether or not such indebtedness has been assumed),
(v) all Contingent Obligations of Borrower, (vi) liabilities and obligations
for the payment of money relating to a capitalized lease obligation or
sale/leaseback obligation, (vii) liabilities and obligations representing the balance
deferred and unpaid of the purchase price of any property or services, except
those incurred in the ordinary course of Borrower’s business that would
constitute ordinarily a trade payable to trade creditors, and (viii) all
payment obligations of Borrower under any interest rate protection agreement
(including, without limitation, any interest rate swaps, caps, floors, collars
or similar agreements) and similar agreements.


 


“Payment Date” has the meaning provided in Section 2.5(a).


 


“Payment Date Statement” has the meaning
provided in Section 2.12(d).


 


“Payment Intangibles” means all of Borrower’s
right, title and interest, whether now owned or hereafter acquired, in, to and
under all “payment intangibles” as defined in the UCC.


 


“PBGC” means the Pension Benefit Guaranty
Corporation established under ERISA, or any successor thereto.


 


“Permits” means all licenses, permits,
variances and certificates required by Legal Requirements to be obtained by
Borrower and used in connection with the ownership, operation, use or occupancy
of the Mortgaged Property (including, without limitation, certificates of
occupancy, building permits, business licenses, state health department
licenses, licenses to conduct business and all such other permits, licenses and
rights, obtained from any Governmental Authority or private Person concerning
ownership, operation, use or occupancy of the Mortgaged Property).


 


“Permitted Encumbrances” means, with respect to
the Mortgaged Property, collectively, (i) the Lien created by the related
Mortgages, or any other Loan Documents of record encumbering each Mortgaged
Property, (ii) all Liens and other matters disclosed on the Title Insurance
Policy concerning each Mortgaged Property, (iii) Liens, if any, for Impositions
imposed by any Governmental Authority not yet delinquent or being contested in
good faith and by appropriate proceedings in accordance with Section 5.1(b)(ii)
hereof and the related Mortgages, (iv) mechanic’s or materialmen’s Liens, if
any, being contested in good faith and by appropriate proceedings in accordance
with Section 5.1(b)(ii) hereof and the related Mortgages, provided
that no foreclosure has been commenced by the lien claimant, (v) rights of
existing and future tenants and residents as tenants only pursuant to Leases,
(vi) Liens for public utilities and (vii) claims against Homesites incurred by
tenants or other occupants of the Mortgaged Property which claims, to the
extent they affect the Mortgaged Property, are contested in good faith and by
appropriate proceedings in accordance with Section 5.1(b)(ii)
hereof, which Liens and encumbrances referred to in clauses (i)-(vii) above do
not materially and adversely affect (1) the ability of Borrower to pay in full
the Principal Indebtedness and interest thereon in a timely manner or
(2) the use of any Mortgaged Property for the use currently being made
thereof or the operation of any Mortgaged Property as currently being operated.


 


16

















 


“Permitted Investments” means any one or more
of the following obligations or securities acquired at a purchase price of not
greater than par:


 


(i)            obligations of, or obligations fully
guaranteed as to payment of principal and interest by, the United States or any
agency or instrumentality thereof provided such obligations are backed by the
full faith and credit of the United States of America;


 


(ii)           obligations of the following United
States of America government sponsored agencies, provided such obligations are
backed by the full faith and credit of the United States of America: Federal
Home Loan Mortgage Corp. (debt obligations), the Farm Credit System
(consolidated systemwide bonds and notes), the Federal Home Loan Banks
(consolidated debt obligations), the Federal National Mortgage Association
(debt obligations), the Financing Corp. (debt obligations), and the Resolution
Funding Corp. (debt obligations);


 


(iii)          federal funds, unsecured certificates
of deposit, time deposits, bankers’ acceptances and repurchase agreements with
maturities of not more than 365 days of any bank, the short-term obligations of
which are rated in the highest short-term rating category by the Rating
Agencies;


 


(iv)          certificates of deposit, time
deposits, demand deposits or banker’s acceptances issued by any depository
institution or trust company incorporated under the laws of the United States
or of any state thereof and subject to supervision and examination by federal
and/or state banking authorities, the short-term obligations of which are rated
in the highest short-term rating category by the Rating Agencies, which
investments are fully insured by the Federal Deposit Insurance Corp.;


 


(v)           debt obligations with maturities of
not more than 365 days and rated by the Rating Agencies in its highest
long-term unsecured rating category;


 


(vi)          commercial paper (including both
non-interest-bearing discount obligations and interest-bearing obligations
payable on demand or on a specified date not more than one year after the date
of issuance thereof) with maturities of not more than 270 days and that is
rated by the Rating Agencies in their highest short-term unsecured debt rating;
and


 


(vii)         any other demand, money market or time
deposit, demand obligation or any other obligation, security or investment,
which Lender shall have approved in writing and for which Borrower shall have
delivered a Rating Confirmation;


 


provided, however, that (A)
the investments described in clauses (i) through (vii) above must have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (B) if such investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, (C) such investments must not be
subject to liquidation prior to their maturity or have an “r” highlighter
affixed to its rating by S&P, and (D) such investments must not be subject
to liquidation prior to their maturity; and provided,  further,
that, in the judgment of Lender, such instrument continues to qualify as a
“cash flow investment” pursuant to Code Section 860G(a)(6) earning a
passive return in the nature of interest and that no instrument or security
shall be a Permitted Investment if such instrument or security evidences (x) a
right to receive only interest payments or (y) the right to receive principal
and interest payments derived from an underlying investment at a yield to
maturity in excess of 120% of the yield to maturity at par of such underlying
investment.


 


17

















 


“Permitted Transfer” means any conveyance,
assignment, sale or other disposition (and not a mortgaging, encumbrance,
pledging, hypothecation, or granting of a security interest) (directly or
indirectly) of not more than 49% of the voting and beneficial ownership
interests in any legal entity comprising Borrower or the General Partner or the
Member following which Affordable Residential Communities LP (i) owns (directly
or indirectly) 51% or more of such voting and beneficial ownership interests in
each legal entity comprising Borrower and General Partner and (ii) controls the
operations and management of Borrower and General Partner; provided,
that any such Transfer referred to above which takes the form of


 


(x)                                   a
Transfer of the equity ownership interest of the General Partner in any legal
entity comprising Borrower which is a limited partnership, or


 


(y)                                 a
Transfer of the equity ownership interests in any legal entity comprising
Borrower or the General Partner or the Member to a transferee which
(collectively amongst itself and its Affiliates that own such equity ownership
interests) acquires (directly or indirectly) a greater than 49% ownership
interest in such legal entity comprising Borrower or the General Partner or the
Member, or which acquires control over the operations and management of such
legal entity comprising Borrower or the General Partner or the Member,


 


shall not be permitted unless, in addition to satisfaction of the
conditions set forth in clauses (i) and (ii) of this definition above, Borrower
delivers to Lender (1) a substantive non-consolidation opinion in form and
substance reasonably acceptable to Lender and the Rating Agencies, if required
by Lender or the Rating Agencies and (2) a Rating Confirmation.


 


“Person” means any individual, corporation,
limited liability company, partnership, joint venture, estate, trust,
unincorporated association, any federal, state, county or municipal government
or any bureau, department or agency thereof and any fiduciary acting in such
capacity on behalf of any of the foregoing.


 


“Personalty” means all right, title and
interest of Borrower in and to all Equipment, Inventory, Accounts, General
Intangibles, Instruments, Investment Property, Receivables, Pledged Accounts, Deposit
Accounts, Contracts and Intellectual Property and all other personal property
as defined in the relevant UCC, now owned or hereafter acquired by Borrower and
now or hereafter affixed to, placed upon, used in connection with, arising from
or otherwise related to the Mortgaged Property or which may be used in or
relating to the planning, development, financing or operation of such Mortgaged
Property, including, without limitation, furniture, furnishings, equipment,
machinery, money, insurance proceeds, accounts, contract rights, trademarks,
goodwill, chattel paper, documents, trade names, licenses and/or franchise
agreements, rights of Borrower under leases of fixtures or other personal
property or equipment, inventory, all refundable, returnable or reimbursable
fees, deposits or other funds or evidences of credit or indebtedness deposited
by or on behalf of Borrower with any governmental authorities, boards,
corporations, providers of utility services, public or private, including
specifically, but without limitation, all refundable, returnable or
reimbursable tap fees, utility deposits, commitment fees and development costs.


 


“Plan” means an employee benefit or other plan,
other than a Multiemployer Plan, that is covered by Title IV of ERISA or
Section 302 of ERISA or Section 412 of the Code, and (i) was
established or maintained by Borrower or any ERISA Affiliate during the five
year period ended prior to the date of this Agreement or to which Borrower or
any ERISA Affiliate makes, is obligated to make or has, within the five year
period ended prior to the date of this Agreement, been required to make
contributions or (ii) with respect to which Borrower could reasonably be
expected to incur liability.


 


18

















 


“Pledge Agreement” means, with respect to
Borrower, the Pledge Agreement from each of the members or partners, as
applicable, of each legal entity comprising Borrower and of the member of the
General Partner to Lender, dated as of the Closing Date, as same may thereafter
from time to time be supplemented, amended, modified or extended by one or more
agreements supplemental thereto.


 


“Pledged Accounts” means the Local Collection
Account(s), the Collection Account, the Reserve Accounts, the Loss Proceeds Account,
the Security Deposit Account, the Master Lease Deposit Account, any additional
accounts now or hereafter maintained by or on behalf of Borrower hereunder and
any sub-accounts of any of the foregoing and any successor accounts to any of
the foregoing.


 


“Policies” has the meaning provided in Section 5.1(x)(iii).


 


“Pre-existing Condition” has the meaning set
forth in Section 5.1(x)(iii)(B) hereof.


 


“Prepaid Rent Account” has the meaning provided
in Section 2.13(d).


 


“Prepayment Fee” means (x) with respect to any
prepayment of the Principal Indebtedness made at any time on or prior to the
February 2005, Payment Date, the product of (i) 0.25%, (ii) the number of
Payment Dates remaining after the day on which such prepayment is made to and
including the Original Maturity Date and (iii) the amount of the Principal
Indebtedness prepaid and (y) with respect to any prepayment of the
Principal Indebtedness made at any time after the February, 2005 Payment Date
to but excluding the Original Maturity Date, the product of 1.00% and the
outstanding Principal Indebtedness prepaid; provided, that
notwithstanding the foregoing, no Prepayment Fee shall be due and payable (1)
if the source of funds for the prepayment is Loss Proceeds and (2) with respect
to any prepayment after the Payment Date immediately preceding the Original
Maturity Date, so long as such prepayment is accompanied by an amount
representing all accrued interest on the portion of the Loan being prepaid
through the end of the related Interest Accrual Period.  Commencing on the Original Maturity Date and
thereafter, no Prepayment Fee shall be due and payable.


 


“Principal Indebtedness” means the principal
amount of the Loan outstanding as adjusted by each increase (including advances
made by Lender to protect the Collateral), or decrease in such principal amount
of the Loan outstanding, whether as a result of prepayment or otherwise, from
time to time.


 


“Proceeds” shall have the meaning given in the
UCC and, in any event, shall include, without limitation, all of Borrower’s
right, title and interest in and to proceeds, product, offspring, rents,
profits or receipts, in whatever form, arising from the Collateral.


 


“Prohibited Person” has the meaning set forth
in Section 4.1(v) hereof.


 


“Property Condition Assessment” means a report
with respect to any Mortgaged Property prepared by an Engineer or another
Person acceptable to the Lender and delivered to Lender in connection with the
Loan and any amendments or supplements thereto delivered to Lender.


 


“Property Expenses” means, with respect to the
Mortgaged Property, the following costs and expenses but only, in the case of
costs and expenses in respect of goods and services, to the extent that they
(x) are paid to Persons who are generally in the business of providing such
goods and services, (y) are customary for the types of goods or services
provided in the geographical area in which such goods or services are provided
and (z) do not constitute Capital Improvement Costs:


 


(i)            Impositions;


 


19

















 


(ii)           insurance
premiums for policies of insurance required to be maintained by Borrower
pursuant to this Agreement or the other Loan Documents or otherwise maintained
by Borrower or an Affiliate of Borrower on behalf of Borrower in the ordinary
course of business with respect to the Mortgaged Property;


 


(iii)          the
cost of all electricity, oil, gas, water, steam, heat, ventilation, air
conditioning and any other energy, utility or similar item and overtime
services with respect to the Mortgaged Property;


 


(iv)          payments
required under service contracts for any services or items used at the
Mortgaged Property or otherwise used in the operation of the Mortgaged Property
(including, without limitation, service contracts for heating, ventilation and
air conditioning systems, elevators, landscape maintenance, pest extermination,
security, furniture, trash removal, answering service and credit checks);


 


(v)           wages,
benefits, payroll taxes, uniforms, the cost of cleaning supplies and all related
expenses for on-site personnel directly involved in the day-to-day operation of
the Mortgaged Property (including, without limitation, full time, part time, or
seasonal employees, allocated between a number of properties and general
repair, maintenance and security employees), whether hired by Borrower, Manager
or any other Person;


 


(vi)          costs
required in connection with the enforcement of any Lease (including, without
limitation, reasonable attorneys’ fees, charges for lock changes and storage
and moving expenses for furniture, fixtures and equipment);


 


(vii)         advertising
and rent-up expenses (including, without limitation, leasing services, tenant
rent concessions, promotions for existing and prospective tenants, banners and
signs);


 


(viii)        out-of-pocket cleaning, maintenance and repair expenses;


 


(ix)           any
expense the total cost of which is passed through to tenants pursuant to
executed Leases;


 


(x)            legal,
accounting, auditing and other professional fees and expenses incurred in
connection with the ownership, leasing and operation of the Mortgaged Property
(including, without limitation, collection costs and expenses);


 


(xi)           permits,
licenses and registration fees and costs;


 


(xii)          any
expense necessary in order to prevent a breach under a Lease;


 


(xiii)         any expense necessary in order to prevent or cure a
violation of any Legal Requirement (including Environmental Law), regulation,
code or ordinance;


 


(xiv)        costs
and expenses of any appraisals, valuations, surveys, inspections, zoning
reports, environmental assessments or market studies;


 


(xv)         costs
and expenses of security and security systems provided to and/or installed and
maintained with respect to the Mortgaged Property;


 


20

















 


(xvi)        costs
of title, UCC, litigation and other searches and costs of maintaining the Lien
of the Mortgages thereon and the security interest in any related Collateral;


 


(xvii)       fees and expenses of property managers contracted with by
Borrower to perform management, administrative, payroll or other services in
connection with the operation of the Mortgaged Property (including, without
limitation, the fees and expenses owed to Manager under any Management
Agreement which the Lender has approved in accordance with this Agreement);


 


(xviii)      any other costs and expenses contemplated by the Operating
Budget and customarily incurred in connection with operating properties similar
in type and character to the Mortgaged Property; and


 


(xix)         any
other category of property expense that is customary for a property of the type
and size as the Mortgaged Property and is reasonably approved by Lender.


 


“Proposed Terms” means, with respect to any
Refinancing Loan, to the extent applicable, the interest rate, amount, term,
application and financing fees, lock box requirements, recourse guarantees,
indemnity requirements and prepayment penalties and prohibitions, closing and
funding conditions, reserve requirements, closing date and any other
non-customary terms in a transaction of such type.


 


“Qualified Interest Rate Cap Provider” means an
interest rate cap counterparty either (x) whose long-term debt obligations
are rated by the Rating Agencies not lower than “AAA” (or the equivalent), or
(y) whose long-term debt or counterparty obligations are rated by the Rating
Agencies not lower than “AA-” (or the equivalent) and whose short-term debt
obligations are rated by the Rating Agencies not lower than “A-1+” (or the
equivalent).


 


“Quarterly Statement” has the meaning provided
in Section 2.12(e).


 


“Rating Agencies” means at least two of Fitch,
Moody’s and S&P (or, if a Secondary Market Transaction has occurred in
which Securities have been issued, each of the foregoing that rated such
Securities).


 


“Rating Criteria” with respect to any Person,
means that (i) the short-term unsecured debt obligations of such Person
are rated at least “A-1” by S&P, “P-1” by Moody’s and “F-1” by Fitch, if
deposits are held by such Person for a period of less than one month, or
(ii) the long-term unsecured debt obligations of such Person are rated at
least “AA-” by S&P, “Aa3” by Moody’s and “AA-” by Fitch, if deposits are
held by such Person for a period of one month or more.


 


“Rating Confirmation” with respect to any
transaction, matter or action in question, means: (i) if all or any portion of
the Loan, by itself or together with other loans, has been the subject of a
Secondary Market Transaction, the written confirmation of the Rating Agencies
that such transaction, matter or action shall not, in and of itself, result in
the downgrading, withdrawal or qualification of the then-current ratings
assigned to any of the Securities issued in connection with a Secondary Market
Transaction; and (ii) if any portion of the Loan has not been the subject of a
Secondary Market Transaction, Lender shall have determined in its reasonable
discretion (taking into consideration such factors as Lender may determine,
including the attributes of the loan pool in which any portion of the Loan
reasonably be expected to be securitized) that no rating for any Securities
that would be issued in connection with a Secondary Market Transaction
involving any of such portion of the Loan would be downgraded, qualified, or
withheld by reason of such transaction, matter or action.


 


21

















 


“Real Estate Taxes Escrow Account” has the
meaning provided in Section 2.13(b).


 


“Receivables” means all of Borrower’s right,
title and interest, whether now owned or hereafter acquired, in, to and under
(i)  any Accounts, Chattel Paper,
Instruments, Payment Intangibles, Letter of Credit Rights, Documents, insurance
policies, drafts, bills of exchange, trade acceptances, notes or other
indebtedness owing to Borrower from whatever source arising, (ii) to the extent
not otherwise included above, (a) all income, Rents, issues, profits, revenues,
deposits and other benefits from the Mortgaged Property and (b) all receivables
and other obligations now existing or hereafter arising, or created out of the
sale, lease, sublease, license, concession or other grant of the right of the
use and occupancy of property or rendering of services by Borrower or any
operator or manager of the Mortgaged Property or other commercial space located
at the Mortgaged Property or acquired from others (including, without limiting
the generality of the foregoing, from rental of space, halls, stores, and
offices, and deposits securing reservations of such space, exhibit or sales
space of every kind, license, lease, sublease and concession fees and rentals,
wholesale and retail sales of merchandise, service charges, vending machine
sales and proceeds, if any, from business interruption or other loss of income
insurance,  (iii) all of the books and
records (whether in tangible, electronic or other form) now or hereafter maintained
by or on behalf of Borrower in connection with the operation of the Mortgaged
Property or in connection with any of the foregoing and (iv) all Supporting
Obligations and all liens and security interests securing any of the foregoing
and all other rights, privileges and remedies relating to any of the foregoing.


 


“Refinancing Loan” has the meaning set forth in
Section 5.1(v).


 


“Release” means any active or passive release,
spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment (including,
without limitation, the movement of Hazardous Substances through ambient air,
soil, surface water, ground water, wetlands, land or subsurface strata).


 


“Release Price” means, with respect to a
Capital Event of any individual Mortgaged Property, the sum of (i) 125% of the
initial Allocated Loan Amount of such Mortgaged Property and (ii) either
(a) if the Debt Service Coverage Ratio of the remaining Mortgaged Properties following
such Capital Event is less than 1.20x, the amount that when applied to pay the
Principal Indebtedness causes the Debt Service Coverage Ratio following such
Capital Event to equal 1.20x or (b) if the Debt Service Coverage Ratio of the
remaining Mortgaged Properties following such Capital Event is equal to or
greater than 1.20x, the amount that when applied to pay the Principal
Indebtedness causes the Debt Service Coverage Ratio following such Capital
Event to be no less than the Debt Service Coverage Ratio immediately prior to
such Capital Event.


 


“Remedial Work” has the meaning set forth in Section 5.1(d)(i).


 


“Rents” means all income, rents (including base
rent), issues, profits, revenues (including all oil and gas or other mineral
royalties and bonuses), deposits (other than utility and security deposits) and
other benefits from the Mortgaged Property.


 


“Replacement Reserve Account” has the meaning
set forth in Section 2.13(a).


 


“Replacement Reserve Deposit Amount” means an
amount equal to one-twelfth (1/12th) of the product of $50.00 and
the number of Homesites at the Mortgaged Property; provided, that,
notwithstanding the foregoing, in the event the Lender determines in its
reasonable discretion that an increase in such amount is necessary to maintain
proper operation of the Mortgaged Properties, then upon not less than thirty
(30) days prior written notice to the Borrower, the Lender may increase the


 


22

















 


aforementioned
amount based upon its reassessment of the amount necessary for Capital
Improvement Costs from time to time.


 


“Replacement Reserve Threshold Amount” means
the product of $50.00 (or such higher amount as the Lender shall reasonably
determine pursuant to the proviso to the definition of Replacement Reserve
Deposit Amount) and the number of Homesites at the Mortgaged Property.


 


“Reserve Account(s)” means the Deferred
Maintenance Escrow Account, the Replacement Reserve Account, the Real Estate
Taxes Escrow Account, the Insurance Escrow Account, the Operating Expense
Account, Working Capital Reserve Account, the Debt Service Reserve Account and
the Prepaid Rent Account, collectively, and any successor accounts to any of
the foregoing.


 


“Restoration” has the meaning set forth in Section 5.1(x)(iii)(B).


 


“S&P” shall mean Standard & Poor’s
Rating Services, a division of The McGraw-Hill Companies, Inc and its
successors.


 


“Second Extended Maturity Date” has the meaning
set forth in Section 2.17(a).


 


“Secondary Market Transaction” has the meaning
set forth in Section 5.1(w).


 


“Securities” means mortgage pass-through
certificates or other securities issued in a Secondary Market Transaction and
evidencing a beneficial interest in or secured in whole or in part by the Loan
in a rated or unrated public offering or private placement.


 


“Security Deposit Account” has the meaning set
forth in Section 2.12(a)(i).


 


“Side Agreement” means that certain letter
agreement, dated as of the Closing Date, executed by the Borrower, the
Guarantor and the Lender.


 


“Single Member” has the meaning set forth in Section 8.1(ee).


 


“Supporting Obligations” means all of
Borrower’s right, title and interest, whether now owned or hereafter acquired,
in, to and under (i) all “supporting obligations” as defined in the UCC and
(ii) any other guarantee, letter of credit, secondary obligation, right or
privilege that supports or pertains to any of the Mortgaged Property.


 


“Survey” means a certified ALTA/ACSM survey of
each Mortgaged Property prepared by a registered Independent surveyor, containing
the form of survey or certification provided to Borrower by Lender and in form
and content reasonably satisfactory to Lender and the company issuing the Title
Insurance Policy for each Mortgaged Property.


 


“Taking” means a taking or voluntary conveyance
during the term hereof of all or part of any Mortgaged Property, or any
interest therein or right accruing thereto or use thereof, as the result of, or
in settlement of, any condemnation or other eminent domain proceeding by any
Governmental Authority affecting the Mortgaged Property or any portion thereof
whether or not the same shall have actually been commenced.


 


“Tax Liabilities” has the meaning set forth in Section 2.10(a)
hereof.


 


23

















 


“Title Insurance Policy” means a mortgagee’s
title insurance policy or policies (i) issued by one or more title companies
reasonably satisfactory to Lender which policy or policies shall (unless Lender
otherwise requires or consents) be in form ALTA 1992, where available (with
waiver of arbitration provisions), naming Lender as the insured party, (ii)
insuring the Mortgages as being a first and prior lien upon the Mortgaged
Property, (iii) showing no encumbrances against any Mortgaged Property (whether
junior or superior to the Mortgages) which are not reasonably acceptable to
Lender other than Permitted Encumbrances, (iv) in an amount reasonably
satisfactory to Lender (it being understood and agreed that because multiple
Mortgaged Properties secure the Loan, a reasonable requirement shall be deemed
to include requiring title insurance for a Mortgaged Property in the amount of
the Allocated Loan Amount for such Mortgaged Property if a tie-in endorsement
is available in the State where such Mortgaged Property is located or 125% of
the appraised value of a Mortgaged Property if a tie-in endorsement is not
available in the State where such Mortgaged Property is located or such
Mortgaged Property cannot be tied together with other Mortgaged Properties for
any reason), and (v) otherwise in form and content reasonably acceptable to
Lender.  Such Title Insurance Policy
shall include the following endorsements or affirmative coverages in form and
substance reasonably acceptable to Lender, to the extent available in the
jurisdiction in which the Land is located: variable rate endorsement; survey
endorsement; comprehensive endorsement; zoning (ALTA 3.1 with parking added)
endorsement; first loss, last dollar and tie-in endorsement; access coverage;
separate tax parcel coverage; contiguity (if applicable) coverage; and such
other endorsements as Lender shall reasonably require with respect to a
particular Mortgaged Property in order to provide insurance against specific
risks identified by Lender in connection with the Mortgaged Property.


 


“Transaction” means the transactions
contemplated by the Loan Documents.


 


“Transaction Costs” means all costs and
expenses paid or payable by Borrower relating to the Transaction (including,
without limitation, appraisal fees, legal fees and accounting fees and the
costs and expenses described in Section 9.23).


 


“Transfer” means the conveyance, assignment,
sale, mortgaging, encumbrance (other than a Permitted Encumbrance), pledging,
hypothecation, granting of a security interest in, granting of options with
respect to, or other disposition of (directly or indirectly, voluntarily or
involuntarily, by operation of law or otherwise, and whether or not for
consideration or of record) all or any portion of any direct or indirect  (irrespective of the number of tiers of
ownership) legal or beneficial interest (a) in all or any portion of the
Mortgaged Property; or (b) any stock, partnership interests, membership
interests or other ownership interests in Borrower, the General Partner, if
any, or the Member or the constituent entities directly or indirectly
(irrespective of the number of tiers of ownership) owning any such stock,
partnership interests, membership interests or other ownership interests.  A Transfer shall also include, without
limitation to the foregoing, the following: an installment sales agreement
wherein Borrower agrees to sell the Mortgaged Property or any part thereof or
any interest therein for a price to be paid in installments; an agreement by
Borrower leasing all or a substantial part of the Mortgaged Property to one or
more Persons pursuant to a single or related transactions, or a sale,
assignment or other transfer of, or the grant of a security interest in,
Borrower’s right, title and interest in and to any Leases or any Rent;
execution or consent by Borrower of any instrument subjecting the Mortgaged
Property to a condominium regime or transferring ownership to a cooperative
corporation; and any change of control of Borrower, General Partner, if any, or
the Member.


 


“Treasury Rate” means, on the date on which
such rate is calculated, the yield on the ten year “on the run” U.S. Treasury
issue (primary issue) with such yield being based on the bid price for such
issue as reasonably determined by Lender.


 


24

















 


“UCC” means with respect to any Collateral, the
Uniform Commercial Code as in effect from time to time in the State of New
York; provided, that if by reason of mandatory provisions of law, the
perfection or the effect of perfection or non-perfection or priority of the
security interest in any item or portion of the Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
New York, “UCC” shall mean the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection or priority.  Wherever this agreement refers to terms as
defined in the UCC, if such term is defined in more than one Article of the
UCC, the definition in Article 9 of the UCC shall control.


 


“UCC Searches” has the meaning set forth in Section 3.1(v)
hereof.


 


“Underwritten Net Cash Flow” means, as of any
date of calculation with respect to the Mortgaged Property, (i) the Operating
Revenues calculated based upon the base rent portion of the Rents during the
most recent three month period for which such information was furnished to
Lender pursuant to Section 5.1(r)(iv)(v) hereof, annualized, plus
(ii) any utility and other income during the most recent twelve month period
for which such information was furnished to Lender pursuant to Section 5.1(r)(v)
hereof, minus (iii) the Operating Expenses with respect to the Mortgaged
Property during the most recent twelve month period for which such information
was furnished to Lender pursuant to Section 5.1(r)(v) hereof, each
as determined by Lender and after Lender makes adjustments, if necessary, for


 


(1)           expenses for management fees equal to
the greater of actual management fees or 5.00% of Operating Revenues for such
period,


 


(2)           a minimum vacancy allowance equal to
5.00%,


 


(3)           an annual minimum capital expenditure
reserve equal to the product of $50.00 multiplied by the total number of
Homesites at the Mortgaged Property,


 


(4)           exclusion of rental income and
expenses from manufactured homes owned by Borrower,


 


(5)           exclusion of any other revenue items
reasonably deemed nonrecurring by Lender, and


 


(6)           inclusion of increases in future
operating costs as determined by Lender, in its sole discretion, so that,
assuming current occupancy, the annualized underwritten Operating Expenses
fully reflect the operating costs expected to be incurred over the next twelve
month period.


 


“Use” means, with respect to any Hazardous
Substance, the generation, manufacture, processing, distribution, handling,
use, treatment, recycling or storage of such Hazardous Substance or
transportation of such Hazardous Substance in connection with or affecting
Borrower or the Mortgaged Property.


 


“Welfare Plan” means an employee welfare
benefit plan as defined in Section 3(1) of ERISA established or maintained
by Borrower or any ERISA Affiliate or with respect to which Borrower or any
ERISA Affiliate has an obligation to make contributions and covers any current
or former employee of Borrower or any ERISA Affiliate.


 


“Working Capital Budget” means, with respect to
any Fiscal Year, the component of the Operating Budget for such fiscal year
submitted by Borrower to Lender in accordance with the provisions


 


25

















 


of Section 5.1(r)(viii)
which sets forth, for each calendar month or other applicable time period, the
amount of the working capital reserve budgeted for such time period and changed
thereto over the course of such budget period (such working capital reserve
amount for any given time period is herein referred to as the “Working
Capital Reserve Amount”).


 


“Working Capital Reserve Account” has the
meaning set forth in Section 2.13(c) hereof.


 


“Working Capital Reserve Amount” has the
meaning set forth in the definition of Working Capital Budget.


 


ARTICLE II.

GENERAL TERMS


 


Section 2.1.            The
Loan.  


 


(a)           Subject
to the terms and conditions of this Agreement, Lender shall lend to Borrower on
the Closing Date the Loan Amount.  The proceeds
of the Loan shall be used solely for the purposes identified in Section 2.2
hereof.  Lender is hereby authorized to
fund directly from the proceeds of the Loan advanced at Closing (net of any
deposits or payments made by Borrower or its Affiliates prior to Closing)
(i) the Origination Fee, (ii) the deposits to the Deferred
Maintenance Escrow Account, the Real Estate Taxes Escrow Account, the Insurance
Escrow Account and the Replacement Reserve Account required to be funded from
Loan proceeds pursuant to Section 2.13, (iii) the
out-of-pocket expenses incurred by Lender in connection with the origination
and funding of the Loan and (iv) the reasonable fees and expenses of
Lender’s and Borrower’s counsel.


 


(b)           The
Loan shall constitute one general obligation of Borrower to Lender and shall be
secured by the security interest in and Liens granted upon all of the
Collateral, and by all other security interests and Liens at any time or times
hereafter granted by Borrower to Lender as security for the Loan.


 


Section 2.2.            Use of Proceeds.  Proceeds of the Loan shall be used only for
the following purposes:  (a) to, with
respect to certain of the Mortgaged Property, finance a portion of the
acquisition cost of, and, with respect to other of the Mortgaged Property,
refinance existing mortgage debt at, such Mortgaged Property, (b) to pay to
Lender the Origination Fee, (c) to make the required deposits to the Deferred
Maintenance Escrow Account, the Real Estate Taxes Escrow Account, the Insurance
Escrow Account and the Replacement Reserve Account, (d) to pay Transaction
Costs (including the reasonable out-of-pocket expenses incurred by Lender in
connection with the origination and funding of the Loan) and (e) to pay
reasonable fees, expenses and disbursements of Lender’s and Borrower’s
counsel.  Any proceeds of the Loan in
excess of the amounts applied in accordance with Sections 2.1(a)
and 2.2(a)-(e) may be used by the Borrower for its general purposes
(including to make a distribution to the Member).


 


Section 2.3.            Security for the
Loan.  The Note and Borrower’s
obligations hereunder and under all other Loan Documents shall be secured by
(a) Liens upon the Mortgaged Property pursuant to the Mortgages, (b) the
Contract Assignment, (c) the Manager’s Subordination, (d) the Assignment of
Rents and Leases, (e) the Pledge Agreement, (f) the Collateral Assignment of
Hedge and all other security interests and Liens granted in this Agreement and
in the other Loan Documents.


 


Section 2.4. 
          Borrower’s Note.  Borrower’s obligation to pay the principal
of and interest on the Loan and all other amounts due under the Loan Documents
shall be evidenced initially by the Note, duly executed and delivered by
Borrower on the Closing Date.  The Note
shall be payable as to principal, interest and all other amounts due under the
Loan Documents, as specified in this Agreement,


 


26

















 


with a final maturity on
the Maturity Date.  Lender shall have
the right to have the Note subdivided, by exchange for promissory notes of
lesser denominations in the form of the initial Note, upon written request to
Borrower and, in such event, Borrower shall promptly execute additional or
replacement Notes, at the Lender’s sole expense with respect to Borrower’s reasonable
out-of-pocket costs in the event and to the extent Borrower incurs costs in
connection therewith other than in connection with the execution of such
additional or replacement Notes.  At no
time shall the aggregate original principal amount of the Note (or of such
replacement Notes) exceed the Loan Amount.


 


Section 2.5. 
          Principal and Interest.  


 


(a)           Borrower
shall pay to Lender interest on the Principal Indebtedness of the Loan from the
Closing Date through the end of the Interest Accrual Period following or during
which the Loan is paid in full at the interest rate provided in this Section 2.5.  Interest on the Loan shall accrue on the
Principal Indebtedness commencing on the Closing Date and shall be payable in
arrears on the eleventh (11th) day of each and every month thereafter until
such time as the Loan shall be repaid in full, unless, in any such case, such
day is not a Business Day, in which event such interest shall be payable on the
first Business Day immediately prior to such date (such date for any particular
month, the “Payment Date”). 
Lender or its servicer shall calculate LIBOR on each Interest
Determination Date for the related Interest Accrual Period and promptly
communicate to Borrower such rate for such period.  The entire outstanding Principal Indebtedness of the Loan and the
Note, together with all accrued but unpaid interest thereon and all other
amounts due under the Loan Documents (including, without limitation, the Exit
Fee), shall be due and payable by Borrower to Lender on the Maturity Date.  Interest shall be computed on the basis of a
360 day year and the actual number of days elapsed during any month or other
accrual period.


 


(b)           For
the initial Interest Accrual Period, the Principal Indebtedness shall bear
interest at a rate per annum equal to 4.09375%.  For each Interest Accrual Period thereafter, the Principal
Indebtedness shall bear interest at a rate per annum equal to the sum of LIBOR
determined as of the Interest Determination Date for such Interest Accrual
Period plus 3.00%.


 


(c)           While
an Event of Default has occurred and is continuing, Borrower shall pay to
Lender interest at the Default Rate on any amount owing to Lender not paid when
due until such amount is paid in full.


 


(d)           If
any payment of principal, interest or other sums shall not be made to Lender on
the date the same is due hereunder or under any of the other Loan Documents,
then Borrower shall pay to Lender, in addition to all sums otherwise due and
payable, a late fee in an amount equal to five percent (5.0%) of such
principal, interest or other sums due hereunder (other than the entire
principal balance of the Loan due upon acceleration of the Loan or upon
Maturity, as to which the Default Administration Fee shall apply) or under any
other Loan Document (or, in the case of a partial payment, the unpaid portion
thereof), such late charge to be immediately due and payable without demand by
Lender.


 


(e)           Borrower
hereby agrees to pay to Lender any amount necessary to compensate Lender and
any Funding Party for any losses or costs (including, without limitation, the
costs of breaking any “LIBOR” contract, if applicable, or funding losses
determined on the basis of Lender’s or such Funding Party’s reinvestment rate
and the interest rate on the Loan) (collectively, “Funding Losses”)
sustained by Lender or any Funding Party: (i) if the Note, or any portion
thereof, is repaid for any reason whatsoever on any date other than a Payment
Date (including, without limitation, from condemnation or insurance proceeds);
or (ii) as a consequence of (x) any increased cost of funds that Lender or any
Funding Party may sustain in maintaining the borrowing evidenced hereby or (y)
the reduction of any amounts received or receivable from Borrower, in either
case under clause (i) or (ii), due to the introduction of, or any change in,
any law or applicable regulation or treaty adopted after the date hereof


 


27

















 


(including
the administration or interpretation thereof), whether or not having the force
of law, or due to the compliance by Lender or the Funding Party, as the case
may be, with any directive, whether or not having the force of law, or request
from any central bank or domestic or foreign governmental authority, agency or
instrumentality having jurisdiction made as of the date hereof.  Notwithstanding anything in this paragraph
to the contrary, Funding Losses shall not include Tax Liabilities which are not
payable by Borrower pursuant to Section 2.10.


 


(f)            If
Lender or any Funding Party shall have determined that the applicability of any
law, rule, regulation or guideline adopted pursuant to or arising out of the
July 1988 report of the Basle Committee on Banking Regulations and Supervisory
Practices entitled “International Convergence of Capital Measurement and
Capital Standards”, or the adoption of any other law, rule, regulation or
guideline (including but not limited to any United States law, rule, regulation
or guideline) regarding capital adequacy, or any change becoming effective in
any of the foregoing or in the enforcement or interpretation or administration
of any of the foregoing by any court or any domestic or foreign governmental
authority, central bank or comparable agency charged with the enforcement or
interpretation or administration thereof, or compliance by Lender or its
holding company or a Funding Party or its holding company, as the case may be,
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency made
after the date hereof, has or would have the effect of reducing the rate of
return on the capital of Lender or its holding company, or of the Funding
Party’s or its holding company, as the case may be, then, upon demand by Lender
and provided that such payments are being demanded from and made by other
borrowers of similarly situated loans, Borrower shall pay to Lender, from time
to time, such additional amount or amounts as will compensate Lender or such
Funding Party for any such reduction suffered.


 


(g)           Any
amount payable by Borrower under Sections 2.5(e) or (f) shall be paid to
Lender within ten (10) Business Days after receipt by Borrower of a certificate
signed by an officer of Lender setting forth the amount due and the basis for
the determination of such amount in reasonable detail and the computations made
by Lender to determine the amount due, which statement shall be conclusive and
binding upon Borrower, absent manifest error. 
Failure on the part of Lender to demand payment from Borrower for any
such amount attributable to any particular period shall not constitute a waiver
of Lender’s right to demand payment of such amount for any subsequent or prior
period; except that Borrower shall not be liable to any Funding Party or to
Lender in respect of any reduction described in Sections 2.5(d) or (e)
with respect to any period more than three (3) months before Borrower receives
the certificate required by the previous sentence.  Lender shall use reasonable efforts to deliver to Borrower prompt
notice of any event described in Sections 2.5(e) or (f) above and of the
amount to be paid as a result thereof, provided, however, any failure by Lender
to so notify Borrower shall not affect its obligation to make the payments to
be made under this Section as a result thereof.  All amounts which may become due and payable by Borrower in
accordance with the provisions of this Section shall constitute additional
interest under the Loan and shall be secured by the Mortgages and the other
Loan Documents.


 


(h)           If
Lender or any Funding Party requests compensation for any losses or costs to be
reimbursed pursuant to any one or more of the provisions of
Sections 2.5(e) or (f), then, upon request of Borrower, Lender or such
Funding Party shall use reasonable efforts in a manner consistent with such
institution’s practice in connection with loans similar in size and type as the
Loan to eliminate, mitigate or reduce amounts that would otherwise be payable
by Borrower under the foregoing provisions, provided that such action would not
be otherwise prejudicial to Lender or such Funding Party, including, without
limitation, by designating another of Lender’s or such Funding Party’s offices,
branches or affiliates as the lending office, branch or affiliate; Borrower
hereby agreeing to pay all reasonably incurred costs and expenses incurred by
Lender or any Funding Party in connection with any such action.


 


28

















 


(i)            Notwithstanding
any provision to the contrary contained in this Agreement or the other Loan
Documents, Borrower shall not be required to pay, and Lender shall not be
permitted to collect, any amount of interest in excess of the  maximum amount of interest permitted by law
(“Excess Interest”).  If any
Excess Interest is provided for or determined by a court of competent
jurisdiction to have been provided for in this Agreement or in any of the other
Loan Documents, then in such event: (1) the provisions of this paragraph
shall govern and control; (2) Borrower shall not be obligated to pay any
Excess Interest; (3) any Excess Interest that Lender may have received
hereunder shall be, at Lender’s option, (a) applied as a credit against
either or both of the Principal Indebtedness of the Loan or accrued and unpaid
interest thereunder (not to exceed the maximum amount permitted by law),
(b) refunded to the payor thereof, or (c) any combination of the
foregoing; (4) the interest rate(s) provided for herein shall be
automatically reduced to the maximum lawful rate allowed from time to time
under applicable law (the “Maximum Rate”), and this Agreement and the
other Loan Documents shall be deemed to have been and shall be, reformed and
modified to reflect such reduction; and (5) Borrower shall not have any
action against Lender for any damages arising out of the payment or collection
of any Excess Interest.  Notwithstanding
the foregoing, if for any period of time interest on any Indebtedness is
calculated at the Maximum Rate rather than the applicable rate under this
Agreement, and thereafter such applicable rate becomes less than the Maximum
Rate, the rate of interest payable on such Indebtedness shall, to the extent
permitted by law, remain at the Maximum Rate until Lender shall have received
or accrued the amount of interest which Lender would have received or accrued
during such period on Indebtedness had the rate of interest not been limited to
the Maximum Rate during such period.  If
the Default Rate shall be finally determined to be unlawful, then the Maximum
Rate shall be applicable during any time when the Default Rate would have been
applicable hereunder, provided however that if the Maximum Rate is greater than
the applicable interest rate, then the foregoing provisions of this paragraph
shall apply.


 


Section 2.6.            Voluntary
Prepayment.  


 


(a)           Borrower
may voluntarily prepay the Loan in whole or in part on any Business Day; provided,
however, that, any such prepayment shall be accompanied by an amount
representing (1) all accrued interest on the portion of the Loan being prepaid,
(2) with respect to any prepayment made on a Business Day other than a Payment
Date, all accrued interest on the portion of the Loan being prepaid through the
end of the Interest Accrual Period during which the prepayment occurs and (3)
all other amounts then due under the Loan Documents (including, without
limitation, the Prepayment Fee, if any, and the Exit Fee).


 


(b)           In
the event of any such voluntary prepayment, Borrower shall give Lender written
notice (or telephonic notice promptly confirmed in writing) of its intent to
prepay, which notice shall be given at least fifteen (15) days’ prior to the
date upon which prepayment is to be made and shall specify the Payment Date on
which such prepayment is to be made and the amount of such prepayment (which
shall not be less than $1,000,000).  If
any such notice is given, the amount specified in such notice shall be due and
payable on the Payment Date specified therein (unless such notice is revoked by
Borrower prior to the date specified therein in which event Borrower shall
immediately reimburse Lender for any reasonable out-of-pocket costs incurred in
connection with the giving of such notice and its revocation).


 


Section 2.7.            Mandatory
Prepayment; Capital Events; Certain Transfers.  


 


(a)           Borrower
may effect a Capital Event with respect to an individual Mortgaged Property on
any Business Day as provided in Section 2.7(c) below or as to all
of the Mortgaged Property on the condition that with respect to any Capital
Event as to all of the Mortgaged Property the Capital Event Proceeds (and, if
necessary, any contributions from the principals of Borrower necessary to make


 


29

















 


the
payments required hereunder) are deposited in the Collection Account and
applied on the date of deposit in the Collection Account to repay the
Indebtedness in full (including (1) all accrued interest on the Principal
Indebtedness through the end of the Interest Accrual Period during which such
deposit occurs, (2) the Prepayment Fee, if any, and the Exit Fee and (3) other
amounts then due under the Loan Documents).


 


(b)           Intentionally
Omitted.


 


(c)           So
long as no Event of Default shall have occurred and be continuing, Borrower may
effect a Capital Event with respect to one or more individual Mortgaged
Property(ies); provided, however, that (1) any such Capital Event
shall be a sale or transfer to an Independent third party in an arm’s-length
transaction or to an Affiliate of Borrower in connection with a refinancing
transaction, and (2) each Capital Event shall be consummated in accordance with
the following procedure:


 


(A)          Borrower shall have given the Lender
at least fifteen (15) Business Days’ prior written notice of the Capital Event,
the identity of the purchaser and the anticipated Capital Event Proceeds; and


 


(B)           Borrower shall make or cause to be
made the deposits to the Collection Account referred to in Sections 2.11(a)
and 2.12(a)(iii).


 


(d)           Upon
payment or prepayment of the Loan in full, Borrower shall pay to Lender, in
addition to the amounts specified in Section 2.6, Section 2.7
and Section 2.12, as applicable, all other amounts then due and
payable to Lender pursuant to the Loan Documents.


 


Section 2.8.            Application
of Payments After Event of Default.  After an Event of Default, Borrower irrevocably waives the right
to direct the application of any and all payments at any time hereafter
received by Lender from or on behalf of Borrower, and Borrower irrevocably agrees
that Lender shall have the continuing exclusive right to apply any and all such
payments and any and all proceeds and recoveries from the Pledged Accounts, the
Mortgaged Property or Borrower after the occurrence and during the continuance
of an Event of Default, in Lender’s sole discretion, to the Indebtedness and
other amounts then outstanding under this Agreement in such order and manner as
Lender may determine in its sole and absolute discretion, including, without
limitation, reasonable out-of-pocket costs and expenses of Lender reimbursable
pursuant to the terms of this Agreement arising as a result of such repayment,
any accrued and unpaid interest then payable with respect to the Loan or the
portion thereof being repaid, the Principal Indebtedness, any accrued and
unpaid Exit Fee or Prepayment Fee in respect of any such Principal Indebtedness
or the portion thereof being repaid, any other sums then due and payable to or
for the benefit of Lender pursuant to this Agreement or any other Loan
Document(s), or to Property Expenses and Capital Improvement Costs for the
Mortgaged Property, or to fund Reserve Accounts.


 


30

















 


Section 2.9.            Method
and Place of Payment.  Except as
otherwise specifically provided herein, all payments and prepayments under this
Agreement and the Note shall be made to Lender not later than 12:00 p.m.,
Eastern time, on the date when due and shall be made in lawful money of the
United States of America by wire transfer in federal or other immediately
available funds to its account at such bank(s) as Lender may from time to time
designate.  Any funds received by Lender
after such time shall, for all purposes hereof, be deemed to have been paid on
the next succeeding Business Day. 
Lender shall notify Borrower in writing of any changes in the account to
which payments are to be made.  All
payments made by Borrower hereunder, or by Borrower under the other Loan
Documents, shall be made irrespective of, and without any deduction for, any
defenses, set-offs or counterclaims.


 


Section 2.10.          Taxes.


 


(a)           All
payments made by or on behalf of Borrower under this Agreement shall be made
free and clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts, duties, charges,
fees, deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority (the “Tax Liabilities”),
excluding net income taxes and franchise taxes (imposed in lieu of net income
taxes) imposed on the Lender as a result of a present or former connection
between such Lender and the jurisdiction of the Governmental Authority imposing
such tax or any political subdivision or taxing authority thereof or therein
including being a citizen or resident or national of, or carrying on a business
or maintaining a permanent establishment in such jurisdiction (other than any
such connection arising solely from such Lender’s having executed, delivered or
performed its obligations or received a payment under, or enforced, this
Agreement if, at the time such Lender first became a party to this Agreement,
the applicable Governmental Authority would not have imposed such taxes but
instead such taxes are a result of a change in relevant tax law including, but
not limited to a change in the generally accepted interpretation of existing
tax law).  If Borrower shall be required
by law to deduct any such Tax Liabilities (or amounts in estimation or
reimbursement for the same) from or in respect of any sum payable hereunder to
Lender, then the sum payable hereunder shall be increased (such increase, “additional
amounts”) as may be necessary so that, after making all required
deductions, Lender receives an amount equal to the sum it would have received
had no such deductions been made.


 


(b)           If
Lender is not a “United States person” within the meaning of
Section 7701(a)(30) of the Code (a “Foreign Lender”) Lender shall
deliver to Borrower, prior to receipt of any payment subject to withholding
under the Code (or upon accepting an assignment of an interest herein), two
duly signed completed copies of either Internal Revenue Service (“IRS”)
Form W-8BEN or any successor thereto (relating to Foreign Lender and
entitling it to an exemption from, or reduction of, withholding tax on all
payments to be made to Foreign Lender by Borrower pursuant to this Agreement)
or IRS Form W-8ECI or any successor thereto (relating to all payments to
be made to Foreign Lender by Borrower pursuant to this Agreement) or such other
evidence satisfactory to Borrower and Borrower that Foreign Lender is entitled
to an exemption from, or reduction of, U.S. withholding tax, including any
exemption pursuant to Section 881(c) of the Code.  If the form W-8BEN or W-8ECI provided by
Lender at the time such Lender first becomes a party to this Agreement
indicates a United States interest withholding tax rate in excess of zero,
withholding tax at such rate shall be considered excluded from Tax Liabilities
reimbursable by Borrower to Lender under Section 2.10(a) hereof,
except to the extent that such Lender’s assignor (if any) was entitled, at the
time of assignment, to receive additional amounts from Borrower pursuant to
Section 2.10(a).  Thereafter and
from time to time, Foreign Lender shall (i) promptly submit to Borrower
such additional duly completed and signed copies of one of such forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may then be available under then current United
States laws and regulations to avoid, or such evidence as is satisfactory to
Borrower and Borrower of any available exemption from or reduction of, United
States withholding taxes in respect of all payments to be made to Foreign
Lender by Borrower


 


31

















 


pursuant
to this Agreement, (ii) promptly notify Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction, and (iii) take such steps as shall not be materially disadvantageous
to it, in the reasonable judgment of such Lender, and as may be reasonably
necessary (including the redesignation of its lending office) to avoid any
requirement of applicable laws that Borrower make any deduction or withholding
for taxes from amounts payable to such Foreign Lender.  Notwithstanding any other provision of this
paragraph, a Foreign Lender shall not be required to deliver any form pursuant
to this paragraph that such Foreign Lender is not legally able to deliver.


 


(c)           If
a Lender transfers its rights and obligations under this Agreement from its
lending office to another lending office, withholding tax (which shall be set
forth in the IRS form or forms described in this Section 2.10 provided by
such Lender to Borrower upon such transfer, taking into account the transfer)
imposed on the Lender after the transfer in excess of the rate imposed prior to
such transfer shall be deemed to be for purposes of this Agreement excluded
from Tax Liabilities reimbursable by Borrower to Lender for periods after the
transfer.  This Section 2.10(c)
shall not apply with respect to a change in lending office required for the
particular right or obligation as a result of any change in, or the adoption or
phase-in of, any law, rule or regulation applicable to such Lender and
occurring after the date of this Agreement and the applicable Lender is unable,
using commercially reasonable efforts, to change such lending office to another
lending office that is subject to a lower withholding tax rate.


 


(d)           If
any Lender voluntarily changes its residence or place of business or takes any
other similar action, and the effect of such change or action, as of the date
thereof, would be to increase the Tax Liabilities of such Lender, the Borrower
shall not be obligated to pay any additional amounts in respect of such
increase.


 


(e)           If
and to the extent that a Foreign Lender sells a participating interest to a
participant which, pursuant to Section 9.9(a), seeks to obtain the
benefits of Section 2.10, then such Foreign Lender shall promptly deliver
to Borrower (i) two duly signed completed copies of the forms or
statements required to be provided by such Lender as set forth above, to
establish the portion of any such sums paid or payable with respect to which
such Lender acts for its own account that is not subject to U.S. withholding
tax, and (ii) two duly signed completed copies of IRS Form W-8IMY (or
any successor thereto), together with any information such Lender chooses to
transmit with such form, and any other certificate or statement of exemption
required under the Code, to establish that such Lender is not acting for its
own account with respect to a portion of any such sums payable to such
Lender.  Notwithstanding any other provision
of this paragraph, a Foreign Lender shall not be required to deliver any form
pursuant to this paragraph that such Foreign Lender is not legally able to
deliver.


 


(f)            For
any period with respect to which a Lender has failed to comply with the
requirements of Section 2.10(b), (e) or (h) (other than to the extent such
failure is due to a change in law, rule or regulation occurring subsequent to
the date on which a form originally was required to be provided), Borrower
shall not be required to pay additional amounts to the Lender pursuant to this
Section 2.10 with respect to Tax Liabilities imposed as a result of such
failure.


 


(g)           Borrower
may, without reduction, withhold any Tax Liabilities required to be deducted
and withheld from any payment under any of the Loan Documents with respect to
which Borrower is not required to pay additional amounts under this
Section 2.10.


 


(h)           Upon
Borrower’s request, if the Lender is a “United States person” within the
meaning of Section 7701(a)(30) of the Code, Lender shall, if and to the
extent required by law, execute and deliver to Borrower an IRS Form W-9.


 


32

















 


Section 2.11.          Release
of Collateral.


 


(a)           Notwithstanding
any other provision of this Agreement or any other Loan Document, upon the
occurrence of a Capital Event with respect to the Mortgaged Property as
described in Section 2.7 hereof, Lender shall, simultaneously with
such Capital Event release of record the Lien of the Mortgages and UCC-1
financing statements and any other Liens in favor of Lender relating to the
Mortgaged Property or the portion thereof affected by such Capital Event; provided,
however, that (i) Lender shall not be required to release its Lien
unless any Proceeds of such Capital Event are paid to Lender in full
satisfaction of the Indebtedness (including any Prepayment Fees, Exit Fees and
other amounts due Lender) or to the Collection Account as required hereunder
and (ii) with respect to a Capital Event consummated in accordance with
this Agreement which does not result in a full satisfaction of the
Indebtedness, if the related Mortgaged Property is located in a state that
imposes mortgage recording taxes, then Lender shall, in lieu of such release,
to the extent necessary to facilitate future savings of mortgage tax, assign at
Borrower’s expense, such Liens to the new lender(s), provided that any such
assignments shall be without recourse, representation, or warranty of any kind,
except that Lender shall represent and warrant (1) the then outstanding amount
of the Principal Indebtedness and (2) that such Liens have not been previously
assigned by Lender.


 


(b)           In
the event Borrower satisfies the outstanding Indebtedness in full, Lender shall
withdraw and hold uninvested for Borrower in an Eligible Account at a financial
institution selected by Lender from the Business Day immediately preceding the
date upon which the release of funds is to be made to Borrower and release on
the date on which the outstanding Indebtedness is repaid in full any and all
amounts then on deposit in the Reserve Accounts and/or the Collection Account
to Borrower.  Upon repayment of the Loan
and all other amounts due hereunder and under the Loan Documents in full in
accordance with the terms hereof and thereof, Lender shall, promptly after such
payment, release or cause to be released all Liens with respect to all
Collateral (including, without limitation, terminating the tenant direction
letters delivered pursuant to Section 2.12(a)) or, to the extent
necessary to facilitate future savings of mortgage tax in states that impose
mortgage taxes, assign at Borrower’s expense, such Liens to Borrower’s new
lender(s), provided that any such assignments shall be without recourse,
representation, or warranty of any kind, except that Lender shall represent and
warrant (1) the then outstanding amount of the Principal Indebtedness and (2)
that such Liens have not been previously assigned by Lender.


 


Section 2.12.          Central
Cash Management.


 


(a)           Local
Collection Accounts; Collection Account; Deposits to and Withdrawals from the
Collection Account.


 


(i)  On or
before the Closing Date, Lender shall (1) establish on behalf of the Borrower
and maintain with the Collection Account Bank a collection account (the “Collection
Account”), which shall be an Eligible Account with a separate and unique
identification number in the name of Lender, as secured party, or, at Lender’s
option, in the name of Borrower for the benefit of Lender, as secured party,
and (2) cause the Collection Account Bank to deliver to Lender the Collection
Account Agreement in form and substance reasonably acceptable to Lender
acknowledging Lender’s security interest in and sole dominion and control over
the Collection Account.  On or before
the Closing Date, Borrower may (x) establish and maintain with one or more
financial institutions acceptable to Lender in its sole reasonable discretion
(individually each, and collectively, the “Local Collection Account Bank”),
one or more local collection accounts for the Mortgaged Property (individually
each, and collectively, the “Local Collection Account”) and one or more
accounts for security deposits (other than Master Lease Deposits) for the
Mortgaged Property (individually each, and collectively, the “Security
Deposit Account”), each of which shall be an Eligible Account with a
separate and unique identification number and


 


33

















 


entitled
in the same name as the Collection Account and (y) cause each Local Collection
Account Bank to deliver to Lender a Local Collection Account Agreement in form
and substance reasonably acceptable to Lender acknowledging Lender’s security
interest in and sole dominion and control over each Local Collection Account
and Security Deposit Account; provided that Borrower may deposit, hold
and administer security deposits (other than Master Lease Deposits) from that
portion of the Mortgaged Property, if any, located in North Carolina in a
Security Deposit Account maintained with Bank of America, N.A. or other
financial institution with a North Carolina branch reasonably acceptable to
Lender, which, it is understood, may not execute a Local Collection Account
Agreement, although Borrower shall make commercially reasonable efforts to
obtain such financial institution’s execution and delivery of a Local Collection
Account Agreement.  On the Closing Date,
Borrower shall deposit $756,007.11 in the Security Deposit Account.  On or before the Closing Date, Lender shall
establish on behalf of Borrower and maintain with the Collection Account Bank a
separate account for Master Lease Deposits (the “Master Lease Deposit
Account”), which shall be an Eligible Account and shall have the same title as
the Collection Account, for the benefit of Lender until the Loan is paid in
full.  On the Closing Date Borrower
shall deposit $71,493 in the Master Lease Deposit Account, which shall be an
estimate of Master Lease Deposits as of the Closing Date.  At least five (5) Business Days prior to the
April, 2004 Payment Date, Borrower will provide to Lender as part of the
Monthly Statement a certified list of Master Lease Deposits showing the amount
of Master Lease Deposits, and the amount of the Master Lease Deposits deposited
in the Master Lease Deposit Account shall be adjusted accordingly on the April,
2004 Payment Date, by a transfer of funds between the Collection Account and
the Master Lease Deposit Account. 
Subject to Section 2.12(a)(ii), Borrower shall


 


(A)          deposit or cause the Manager to
deposit in the Security Deposit Account (or into the Master Lease Deposit
Account, with respect to Master Lease Deposits) not less than one time during
each calendar month all security deposits in the form of Money received from
the tenants, since the date of the previous deposit (or in the case of the
initial deposit, since the Closing Date),


 


(B)           deposit or cause the Manager to
deposit in the Collection Account or Local Collection Account, all Rents and
Money received from Accounts or under Leases and derived from the Mortgaged
Property and all Proceeds thereof, in each case on each Business Day following
the collection and receipt thereof during the first seven (7) Business Days of
each calendar month and not less than once during each calendar week of such
month commencing after such seventh (7th) day, and


 


(C)           sweep or cause to be swept by each
Local Collection Account Bank all Money on deposit in the Local Collection
Account in excess of $10,000 (which the Local Collection Account Bank shall be
entitled to use to offset any returned items) to the Collection Account on each
Business Day.


 


Borrower shall not have
any right to withdraw Money from the Local Collection Account, the Security
Deposit Account, the Master Lease Deposit Account or the Collection Account,
which shall be under the sole dominion and control, and the “control” within
the meaning of Sections 9-104 and 9-106 of the UCC, of Lender; provided,
that notwithstanding the foregoing, so long as an Event of Default has not
occurred and is not continuing (or if an Event of Default has occurred and is
continuing but Borrower is required to return the security deposit in
accordance with applicable Legal Requirements), Borrower may instruct the Local
Collection Account Bank to withdraw from the Security Deposit Account security
deposits (other than Master Lease Deposits) in order to satisfy Borrower’s
obligations to return the same to tenants entitled to them under and


 


34

















 


in accordance with the
Leases.  Any disbursement of Master
Lease Deposits shall in each case be subject to Lender’s prior approval and
direction, provided that Lender shall authorize, upon Borrower’s request
made not more frequently than on a monthly basis, disbursements reflecting any
reduction in Master Lease Deposits to which the tenant under the applicable
Master Homesite Lease Documentation is entitled.  In the event of a Lease default or other occurrence whereby
Borrower, as landlord, shall become entitled to retain any security deposits or
apply the same to amounts owed under the applicable Lease, any such security
deposits so retained and/or applied by Borrower shall, upon such retention or
application, be transferred from the Security Deposit Account to the Local
Collection Account or the Collection Account and treated in the same manner as
Rents provided, that in the event of a default under a Master Homesite
Lease Agreement entitling the landlord to retain Master Lease Deposits, the
Master Lease Deposits shall not be transferred to the Collection Account and
treated as Rents but instead shall continue to be held in the Master Lease
Deposit Account as additional collateral for the Indebtedness.  Any such Rents, Money or Proceeds held by
Borrower or the Manager prior to deposit into the Local Collection Account
shall be held in trust for the benefit of Lender.  Borrower shall be responsible for the payment of all costs and
expenses in connection with establishing and maintaining the Collection
Account, the Local Collection Account, the Security Deposit Account, the Master
Lease Deposit Account and the Reserve Accounts (including, without limitation,
Collection Account Bank’s and Local Collection Account Bank’s fees and charges)
and shall reimburse Lender upon demand for any such costs or expenses incurred
by Lender.


 


(ii)  In the
event that any Event of Default has occurred and is continuing,


 


(A)          upon request of Lender, Borrower shall
deliver to each tenant under a Lease an irrevocable direction letter in a form
approved by Lender requiring the tenant to pay all Rents and other Money under
Leases, and any Money received from Accounts or otherwise derived from the
Mortgaged Property and Proceeds thereof owed to Borrower directly to the
Collection Account or (if Lender elects) a Local Collection Account and shall
deliver an irrevocable direction letter in such form to each tenant under a new
Lease entered into thereafter prior to the commencement of such Lease,


 


(B)           upon request of Lender, all Rents and
Money received from Accounts or under Leases and derived from the Mortgaged
Property and all Proceeds thereof shall be payable to Lender or as otherwise
directed by Lender,


 


(C)           if a tenant under a Lease forwards
any Rents, Money or Proceeds to Borrower or Manager rather than directly to the
Collection Account or applicable Local Collection Account, Borrower shall (i)
if the Lender has made the request referred to in Section 2.12(a)(ii)(A)
above, deliver an additional irrevocable direction letter to the tenant and
make other commercially reasonable efforts to cause the tenant to thereafter
forward such Rents, Money or Proceeds directly to the Collection Account or (if
Lender elects) a Local Collection Account, and (ii) immediately deposit or
cause the Manager to deposit in the Collection Account any such Rents, Money or
Proceeds received by Borrower or Manager,


 


(D)          Borrower shall not have any right to
make or direct any withdrawals from the Collection Account or the Reserve
Account without the prior written consent of Lender (it being understood and
agreed that Borrower may continue to make withdrawals from the Security Deposit
Account as described above), and


 


35

















 


(E)           any and all funds on deposit in the
Collection Account and the Reserve Accounts may be allocated by Lender in its
sole discretion for the payment of the Indebtedness pursuant to Section 2.8
of this Agreement or to the Operating Expense Account, the Working Capital
Reserve Account or the Debt Service Reserve Account.


 


(iii)  Borrower
shall deposit in the Collection Account: 
(a) as and when required by Sections 5.1(x) and (y),
Loss Proceeds received by Borrower and (b) simultaneously with the consummation
of any Capital Event, the Capital Event Proceeds resulting from such Capital
Event and, if the related Capital Event Proceeds are less than the related
Release Price, any Borrower Release Price Contribution necessary in connection
with such Capital Event in order to pay the Release Price for a Capital Event
of an individual Mortgaged Property or group of Mortgaged Properties.


 


(b)           Distribution
of Cash.  So long as an Event of
Default has not occurred and is not continuing (and thereafter at Lender’s sole
option and discretion), Lender shall apply funds on deposit in the Collection
Account (to the extent not held in Reserve Accounts constituting sub-accounts
of the Collection Account, if any, and with the exception of Capital Event
Proceeds and Loss Proceeds, which shall be applied as provided in Section 2.7
of this Agreement) on each Payment Date, to the extent of the amounts set forth
in the related Payment Date Statement delivered by Lender or its servicer, as
follows:


 


(i)  first,
to the Real Estate Taxes Escrow Account and the Insurance Escrow Account, in
that order, in the respective amounts required to be deposited therein as
described in Section 2.13(b);


 


(ii)  second,
to the payment to Lender of (i) the interest then due and payable on the Note
with respect to the related Interest Accrual Period, (ii) the Exit Fee,
the Extension Fee and the Prepayment Fee, if any, then due and payable and
(iii) the Principal Indebtedness in an amount equal to the sum of (1) if a
Capital Event of an individual Mortgaged Property(ies) occurred during the
related Collection Period, the related Release Price plus (2) any Loss Proceeds
to which the Lender is then entitled pursuant to this Agreement;


 


(iii)  third,
to the payment to Lender of any expenses then due and payable to Lender or its
servicer(s) pursuant to this Agreement or the other Loan Documents;


 


(iv)  fourth,
to the Replacement Reserve Account in the amount required to be deposited
therein as described in Section 2.13(a);


 


(v)  fifth,
to the payment of any outstanding indemnification payment to which an
Indemnified Party is then entitled pursuant to Sections 5.1(i) and 5.1(j),
and any other amounts then due and payable to Lender pursuant to this Agreement
and the other Loan Documents which are not paid from applications under clause
(iii) above;


 


(vi)  sixth,
to the Prepaid Rent Account in the amount required to be deposited therein as
described in Section 2.13(d);


 


(vii)  seventh,
if no Event of Default exists, to Borrower in an amount equal to remaining
available funds, if any; provided, that if any Event of Default exists,
no disbursement shall be made under this clause sixth; and


 


(viii)  eighth,
if any Event of Default exists, then to the extent Lender has not made other
application of such remaining available funds in Lender’s discretion as
provided hereunder, all


 


36

















 


remaining available funds
shall be allocated as determined by Lender in Lender’s sole and absolute
discretion (and re-allocated from time to time as Lender may elect) and
retained in the Debt Service Reserve Account, the Working Capital Reserve
Account and/or the Operating Expense Account or, at Lender’s option, in other
Lender-controlled accounts.


 


(c)           Permitted
Investments.  So long as no Event of
Default has occurred and is continuing, Borrower shall direct Lender in writing
to invest and reinvest any balance in the Collection Account, from time to time
in Permitted Investments; provided, however, that


 


(i)            the maturity of the Permitted
Investments on deposit therein shall be at the discretion of Borrower, but in
any event no later than the Business Day immediately preceding the date on
which such funds are required to be withdrawn therefrom pursuant to Section 2.12(a)
or 2.12(b) of this Agreement,


 


(ii)           after an Event of Default has
occurred and for so long as such Event of Default is continuing Borrower shall
not have any right to direct investment of the balance in the Collection
Account,


 


(iii)          all such Permitted Investments shall
be held in the name of Lender or its servicer and shall be credited to the
Collection Account, and


 


(iv)          if no written investment direction is
provided to Lender by Borrower, Lender may at Lender’s option invest any
balance in the Collection Account in such Permitted Investments as may be
selected by Lender.


 


Lender shall have no liability for any loss in investments of funds in
the Collection Account that are invested in Permitted Investments and no such
loss shall affect Borrower’s obligation to fund, or liability for funding, the
Collection Account.  All interest paid
or other earnings on the Permitted Investments of funds deposited into the Collection
Account made hereunder shall be deposited into the Collection Account.  Borrower shall include all earnings on the
Collection Account as income of Borrower for federal and applicable state tax
purposes.


 


(d)           Monthly
and Payment Date Statements.  With
respect to each Collection Period, Lender or its servicer shall prepare and
deliver, or shall cause to be prepared and delivered, to Borrower and Lender a
statement no later than ten (10) Business Days after the end of such Collection
Period setting forth the aggregate deposits to and withdrawals from the
Collection Account and each Reserve Account and the opening and closing
balances in such accounts (collectively, the “Monthly Statement”).  With respect to each Payment Date and the
related Collection Period and Interest Accrual Period, Lender or its servicer
shall prepare and deliver, or shall cause to be prepared and delivered to
Borrower and Lender, a statement (each, a “Payment Date Statement”) no
later than the Business Day prior to such Payment Date with respect to each of
the items below, setting forth the following:


 


(i)  the
aggregate deposits to the Collection Account during the related Collection
Period for each type of deposit under this Agreement and the opening and
closing balances in the Collection Account;


 


(ii)  the
amount of interest then due and payable on the Note with respect to the
Interest Accrual Period (including the applicable number of days and interest
rate which were applied in determining such amount);


 


37

















 


(iii)  the
amount of the Exit Fee, the Extension Fee or the Prepayment Fee, if any, then
due and payable;


 


(iv)  the
amount of any expenses payable to Lender and any outstanding indemnification
payment to which an Indemnified Party is then entitled under this Agreement;


 


(v)  the
following information with respect to the Principal Indebtedness in a format
reasonably acceptable to Lender:  (1)
the Principal Indebtedness as of the preceding Payment Date, (2) any principal
payable to Lender pursuant to Sections 2.6, 2.7  or  2.12
on such Payment Date, and (3) the Principal Indebtedness on the current Payment
Date (taking into account such payments); and


 


(vi)  the
amount withdrawn from or remitted to each account of the Reserve Account in
accordance with Sections 2.12 and 2.13 and the amount
remitted to Borrower.


 


(e)           Intentionally
Omitted.


 


(f)            Loss
Proceeds.  In the event of a
casualty or Taking with respect to the Mortgaged Property, unless pursuant to Section 5.1(x)
of this Agreement, the Loss Proceeds are to be made available to Borrower for
Restoration, all of Borrower’s interest in Loss Proceeds shall be paid directly
to the Collection Account.  If the Loss
Proceeds are to be made available for Restoration pursuant to this Agreement,
such Loss Proceeds shall be held by Lender in a segregated interest-bearing
Eligible Account in the name of Lender and under the sole dominion and control
of Lender to be opened (if not previously opened and maintained by the
Collection Account Bank under the Collection Account Agreement by the Lender)
by Lender at a financial institution selected by Lender (the “Loss Proceeds
Account”).  Funds on deposit in the
Loss Proceeds Account shall be invested in Permitted Investments in the same
manner and subject to the same restrictions as set forth in Section 2.12(c)
with respect to the Collection Account (except that the maturity shall be not
later than as necessary to satisfy any schedule of distributions for
Restoration required or approved by Lender). 
If any Loss Proceeds are received by Borrower, such Loss Proceeds shall
be received in trust for Lender, shall be segregated from other funds of
Borrower, and shall be forthwith paid to Lender to the extent necessary to
comply with this Agreement.


 


Section 2.13.          Reserve
Accounts.


 


(a)           Deferred
Maintenance Escrow Account and Replacement Reserve Account.


 


(i)  On or
before the Closing Date, Lender shall establish on behalf of the Borrower and
maintain with the Collection Account Bank two separate accounts for deferred
maintenance and replacement reserves, each of which shall be an Eligible
Account and shall have the same title as the Collection Account, for the
benefit of Lender until the Loan is paid in full.  The two accounts shall be designated the “Deferred Maintenance
Escrow Account” (the “Deferred Maintenance Escrow Account”) and the
“Replacement Reserve Account” (the “Replacement Reserve Account”).  On the Closing Date, Lender shall deposit
out of the Loan proceeds $1,559,078.75 in the Deferred Maintenance Escrow
Account.  On each Payment Date,
commencing with the March 2004 Payment Date, Borrower shall deposit from the
Collection Account (or if the funds for such deposit are not available pursuant
to Section 2.12(b), shall make an additional deposit of Borrower’s
funds sourced from equity capital contributions) to the Replacement Reserve
Account, of an amount equal to the Replacement Reserve Deposit Amount until the
amount on deposit in the Replacement Reserve Account equals the Replacement
Reserve Threshold Amount for the initial time. 
During the period commencing on the March 2004 Payment Date when such
deposits are being made to the Replacement Reserve Account until the funds on
deposit therein


 


38

















 


equal the Replacement Reserve
Threshold Amount for the initial time, no withdrawals may be made from the
Replacement Reserve Account.  After the
amount on deposit in the Replacement Reserve Account equals the Replacement
Reserve Threshold Amount for the initial time, the Borrower may request withdrawals
from the Replacement Reserve Account pursuant to the procedure set forth in Section 2.13(a)(iii)
below.  In the event following such
withdrawal, the amount on deposit in the Replacement Reserve Account shall be
less than the Replacement Reserve Threshold Amount then on each subsequent
Payment Date Borrower shall deposit from the Collection Account (or if the
funds for such deposit are not available pursuant to Section 2.12(b),
shall make an additional deposit of Borrower’s funds sourced from equity capital
contributions) to the Replacement Reserve Account, of an amount equal to the
Replacement Reserve Deposit Amount until the amount on the deposit in the
Replacement Reserve Account once again equals the Replacement Reserve Threshold
Amount (following which event the Borrower shall once again not be obligated to
make deposits to the Replacement Reserve Account).


 


(ii)  Any and
all Moneys remitted to the Deferred Maintenance Escrow Account, together with
any Permitted Investments in which such Moneys are or will be invested or
reinvested during the term of this Agreement, shall be held in the Deferred
Maintenance Escrow Account to be withdrawn by Lender upon written request of
Borrower made not more than once each month in an amount not less than $10,000,
and applied to pay directly or reimburse Borrower for repairs set forth on Schedule
1 attached hereto (the “Immediate Repairs”) upon satisfaction of the
disbursement conditions listed on Schedule 6 hereof.  Within the applicable time period(s) for
completion set forth on Schedule 1, Borrower shall complete such
Immediate Repairs and shall provide to Lender such documentation, and other
evidence of compliance with law as Lender may reasonably require. The funds
contained in the Deferred Maintenance Escrow Account shall be utilized by
Borrower solely for performance of the Immediate Repairs in accordance with the
Property Condition Assessments and Environmental Reports, and shall not be used
by Borrower for purposes for which any other Reserve Account is established.
Upon written application of Borrower (which may be done by electronic mail or
e-mail), Borrower shall be entitled to obtain disbursements by Lender from the
Deferred Maintenance Escrow Account to pay costs incurred by Borrower for such
Immediate Repairs, provided that (a) no Event of Default has occurred and is
continuing, (b) Borrower shall provide to Lender (including by electronic mail
or e-mail) such documentation and certifications as Lender may reasonably
request to substantiate the requirement for and entitlement to such
disbursement, (c) Borrower shall provide to Lender (including by electronic
mail or e-mail) with all invoices, receipts, lien waivers and other
documentation of lawful and workmanlike progress or completion, lien-free
status, and availability of sufficient funds, all as may be reasonably
requested by Lender, and (d) Borrower shall provide Lender such evidence as may
be reasonably satisfactory to Lender that after payment of any draw for
Immediate Repairs, the funds remaining in the Deferred Maintenance Escrow
Account shall be sufficient to pay for the remainder of such Immediate
Repairs.   In the event Borrower
completes the repairs for which funds were reserved in the Deferred Maintenance
Escrow Account to the reasonable satisfaction of Lender, Lender shall disburse
any and all amounts then on deposit in the Deferred Maintenance Escrow Account
to the Collection Account.


 


(iii)  Subject
to the provisions of Section 2.13(a)(i), any and all Moneys
remitted to the Replacement Reserve Account, together with any Permitted
Investments in which such Moneys are or will be invested or reinvested during
the term of this Agreement, shall be held in the Replacement Reserve
Account  to be withdrawn by Lender upon
written request of Borrower made not more than once each month in an amount not
less than $10,000, and applied to reimburse Borrower for Capital Improvement
Costs (other than those for Immediate Repairs) reasonably approved by Lender
for disbursements from the Replacement Reserve (“Approved


 


39

















 


Capital Expenditures”) upon satisfaction of the
disbursement conditions listed on Schedule 6 hereof, provided that funds
in the Replacement Reserve Account shall not be used by Borrower for purposes
for which any other Reserve Account is established.


 


(b)           Real
Estate Taxes Escrow Account and Insurance Escrow Account.  On or before the Closing Date, Lender shall
on behalf of the Borrower establish and maintain with the Collection Account
Bank two separate accounts for Basic Carrying Costs, each of which shall be an
Eligible Account and shall have the same title as the Collection Account for
the benefit of Lender until the Loan is paid in full.  The two accounts shall be designated the “Real Estate Taxes
Escrow Account” (the “Real Estate Taxes Escrow Account”) and the
“Insurance Escrow Account” (the “Insurance Escrow Account”).  On the Closing Date, the Lender shall
deposit out of the Loan proceeds $518,926.80 in the Real Estate Taxes Escrow
Account and $70,873.60 in the Insurance Escrow Account (i.e. the amount
necessary to meet the first bill with credit for existing monthly escrow
payments made prior to the applicable due date).  With respect to each Payment Date, Borrower shall deposit from
the Collection Account (or, if the funds for such deposit are not available
pursuant to Section 2.12(b), shall make an additional deposit of
Borrower’s funds sourced from equity capital contributions),


 


(1)           an amount equal to (1/12th)
one-twelfth of the annual real estate taxes and any other Impositions that if
not paid in a timely manner will result in a Lien on a Mortgaged Property in
the Real Estate Taxes Escrow Account,


 


(2)           an amount equal to one-twelfth (1/12th)
of the annual insurance premiums for policies of insurance required to be
maintained by Borrower with respect to the Mortgaged Property pursuant to this
Agreement, and any additional insurance required under any of the other Loan
Documents, in the Insurance Escrow Account.


 


Any and all Moneys remitted to the Real Estate Taxes Escrow Account or
Insurance Escrow Account (which shall not bear interest for the benefit of
Borrower) shall be held in the Real Estate Taxes Escrow Account or Insurance
Escrow Account to be withdrawn from the Real Estate Taxes Escrow Account or
Insurance Escrow Account, as applicable, by Lender or its servicer upon written
request of Borrower delivered to Lender and its servicer together with
documentation and other evidence (including invoices and in the case of a
reimbursement of Borrower, evidence that the related costs have been paid) with
respect to the respective Basic Carrying Costs towards which such funds are to
be applied, and applied to pay directly (or reimburse Borrower, in the case of
insurance premiums only) for (x) any Impositions (in the case of the Real
Estate Taxes Escrow Account) or (y) any insurance premiums for policies of
insurance required to be maintained by Borrower with respect to the Mortgaged
Property pursuant to this Agreement, and any additional insurance required
under any of the other Loan Documents (in the case of the Insurance Escrow
Account).  Borrower shall provide Lender
or its servicer with bills and other documents necessary for payment of
Impositions and insurance premiums at least ten (10) Business Days prior to the
due dates therefor.  In the event the
amount on deposit in the Real Estate Taxes Escrow Account or the Insurance
Escrow Account exceeds the amount due for Impositions by more than one-twelfth (1/12th)
of the annual real estate taxes (in the case of the Real Estate Taxes Escrow
Account) or the amount due for insurance premiums (in the case of the Insurance
Escrow Account), respectively, Lender or its servicer shall in its sole
discretion credit such excess against future payment obligations to the Real
Estate Taxes Escrow Account or the Insurance Escrow Account, as applicable.


 


(c)           Operating
Expense Account, Working Capital Reserve Account and the Debt Service Reserve
Account.  On or before the Closing
Date, Lender shall on behalf of the Borrower establish and maintain with the
Collection Account Bank three accounts for the remittance of funds by Lender or
its servicer in its sole discretion after an Event of Default has occurred and
is continuing, each of which shall be an Eligible Account and shall have the
same title as the Collection Account for the


 


40

















 


benefit
of Lender until the Loan is paid in full. 
The three accounts shall be designated the “Operating Expense Account”
(the “Operating Expense Account”), the “Working Capital Reserve Account”
(the “Working Capital Reserve Account”) and the “Debt Service Reserve
Account” (the “Debt Service Reserve Account”).  On any Business Day after the occurrence and during the
continuance of an Event of Default, Lender or its servicer may in its sole
discretion deposit into the Operating Expense Account, the Working Capital
Reserve Account or the Debt Service Reserve Account any funds then on deposit
in the Local Collection Account or the Collection Account.  Any and all Moneys remitted to the Operating
Expense Account, the Working Capital Reserve Account or the Debt Service
Reserve Account shall, until otherwise applied by Lender from time to time at
Lender’s sole discretion during the existence of any Event of Default, be held
in the Operating Expense Account, the Working Capital Reserve Account or the
Debt Service Reserve Account, as applicable, and applied, if Lender elects in
its sole discretion to make such funds available for such application,


 


(x)            with respect to the Operating
Expense Account only, to pay Property Expenses provided for in the Operating
Budget approved by Lender, or for other Property Expenses approved by Lender,


 


(y)           with respect to the Working Capital
Reserve Account only, as a working capital reserve up to the then applicable
Working Capital Reserve Amount, as the same adjusts from time to time under the
then applicable Working Capital Budget, or in such greater or lesser amount as
Lender may determine from time to time, with disbursements from time to time at
Lender’s option from the Working Capital Reserve Account to the Operating
Expense Account as working capital needs arise which may not be satisfied from
the funds on hand in the Operating Expense Account, all at the sole election of
Lender, and


 


(z)            with respect to the Debt Service
Reserve Account only, applied to pay the Indebtedness at the sole election of
Lender;


 


provided, that (1) notwithstanding
the foregoing, Lender may at any time, in its sole discretion, elect to apply
the funds on deposit in the Operating Expense Account and/or the Working
Capital Reserve Account to pay the Indebtedness (including without limitation
any Prepayment Fee, Exit Fee and other amounts due Lender in connection with
such prepayment) while any Event of Default exists, and (2) in the event Lender
accepts in writing a proposed cure of the Event of Default which precipitated
the deposits to the Operating Expense Account, the Working Capital Reserve
Account and the Debt Service Reserve Account and no other Event of Default
exists, then the funds on deposit in the Operating Expense Account, the Working
Capital Reserve Account and the Debt Service Reserve Account shall be released
to Borrower.


 


(d)           Prepaid
Rent Account.  On or before the
Closing Date, Lender shall on behalf of the Borrower establish and maintain
with the Collection Account Bank an account for the remittance of prepaid Rent
designated the Prepaid Rent Account (the “Prepaid Rent Account”) which
shall be an Eligible Account and shall have the same title as Collection
Account for the benefit of the Lenders until the Loan is paid in full.  On the Closing Date, the initial Lender
shall deposit out of the Loan proceeds $28,307.99 in the Prepaid Rent Account,
which shall be an estimate of prepaid Rent held by Borrower.  At least five (5) Business Days prior to the
April, 2004 Payment Date, Borrower will provide to Lender a certified prepaid
rent roll in the form attached as Schedule 9 showing the amount of prepaid Rent
held by Borrower, and the amount of the prepaid Rent deposited in the Prepaid
Rent Account shall be adjusted accordingly on the April, 2004 Payment Date, by
a transfer of funds between the Collection Account and the Prepaid Rent
Account.  On any Payment Date as of
which the most recent Monthly Statement indicates that the prepaid Rent exceeds
$25,000, Lender shall deposit or cause to be deposited in the Prepaid Rent
Account pursuant to clause sixth of Section 2.12(b) an amount equal
to the positive


 


41

















 


difference,
if any, between the amount indicated in the Monthly Statement and the amount
then on deposit in the Prepaid Rent Account. 
On any Payment Date as of which the most recent Monthly Statement
indicates that the prepaid Rent exceeds $25,000 but is less than the amount
then on deposit in the Prepaid Rent Account, the Lender shall withdraw from the
Prepaid Rent Account and transfer to the Collection Account the positive
difference between the amount on deposit in the Prepaid Rent Account and such
amount contained in the most recent Monthly Statement to be applied together
with the other collections from the Mortgaged Properties pursuant to Section 2.12(b)
on such Payment Date.  On any Payment
Date as of which the most recent Monthly Statement indicates that the prepaid
Rent which was previously in excess of $25,000 has been reduced below $25,000,
the Lender shall withdraw from the Prepaid Rent Account and transfer to the
Collection Account the entire amount of funds then on deposit in the Prepaid
Rent Account to be applied together with the other collections from the
Mortgaged Properties pursuant to Section 2.12(b) on such Payment
Date.  After a release of a Mortgaged
Property, all of the references above in this paragraph to $25,000 shall be
adjusted to equal one-twelfth (1/12th) of the product of 3.75% and
the Underwritten Net Cash Flow of the remaining Mortgaged Property.


 


(e)           Investment
of Funds.  All or a portion of any
Moneys in the Reserve Accounts (other than the Real Estate Tax Escrow Account,
the Insurance Escrow Account, the Operating Expense Account, the Working
Capital Reserve Account and the Debt Service Reserve Account, none of which
shall bear interest for the benefit of Borrower) shall be invested and
reinvested, so long as an Event of Default has not occurred and is not
continuing, by Lender in accordance with written instructions delivered by
Borrower, or after an Event of Default has occurred and is continuing, by
Lender, in one or more Permitted Investments. 
If no written investment direction is provided to Lender by Borrower,
Lender may at its option invest such Moneys in a Permitted Investment selected
by Lender.  All interest paid or other
earnings on the Permitted Investments of funds deposited into the Reserve
Accounts made hereunder shall be deposited into the Reserve Accounts (other
than with respect to the Real Estate Taxes Escrow Account and the Insurance
Escrow Account for which Lender and its servicer shall not have any obligation
to deposit such interest or earnings into such accounts).  Lender shall have no liability for any loss
in investments of funds in any Reserve Account that are invested in Permitted
Investments and no such loss shall affect Borrower’s obligation to fund, or
liability for funding, the Reserve Accounts. 
Unless and until title to the funds therein shall have vested in any
Person other than Borrower, Borrower shall include all such income or gain on
any account of the Reserve Account as income of Borrower for federal and
applicable state tax purposes.


 


(f)            Event
of Default.  After an Event of
Default has occurred and is continuing, Borrower shall not be permitted to make
any withdrawal(s) from any Pledged Accounts and Lender may liquidate any
Permitted Investments of the amount on deposit in such account, withdraw and
use such amount on deposit in the Pledged Accounts to make payments on account
of the Indebtedness or otherwise as provided in Section 2.8.  Without in any way limiting the foregoing or
Lender’s rights and remedies upon an Event of Default, and subject to Lender’s
direction otherwise from time to time, in whole or in part, in Lender’s sole
and absolute discretion, after and during the continuance of an Event of
Default Lender may direct the Collection Account Bank or the Local Collection
Account Bank to disburse to Lender or allocate all available funds on deposit
in the Pledged Accounts to: (a) any debt service or other Indebtedness due
under this Loan Agreement or the other Loan Documents; (b) any Reserve Account
established under this Loan Agreement; (c) otherwise as a reserve for Property
Expenses, Capital Improvement Costs, Impositions and other expenditures
relating to the use, management, operation or leasing of the Mortgaged
Property; and/or (d) any costs and expenses incurred by Lender in connection
with such Event of Default, or expended by Lender to protect or preserve the
value of the Mortgaged Property.


 


Section 2.14.          Additional
Provisions Relating to the Pledged Accounts.


 


42

















 


(a)           Borrower
covenants and agrees that:  (i) all
securities or other property underlying any financial assets credited to any
Pledged Account shall be registered in the name of Lender, indorsed to Lender
or indorsed in blank or credited to another securities account maintained in
the name of Lender and in no case will any financial asset credited to any
Pledged Account be registered in the name of Borrower, payable to the order of
Borrower or specially indorsed to Borrower except to the extent the foregoing
have been specially indorsed to Lender or in blank; and (ii) all Permitted
Investments and all other property delivered to Lender pursuant to this
Agreement will be promptly credited to one of the Pledged Accounts.


 


(b)           Borrower
hereby agrees that each item of property (whether investment property,
financial asset, security, instrument, cash or otherwise) credited to any
Pledged Account shall be treated as a “financial asset”  within the meaning of Section 8-102(a)(9)
of the UCC.


 


(c)           Borrower
acknowledges and agrees that the Collection Account Bank and Local Collection
Account Bank shall comply with all “entitlement orders” (i.e. an order
directing transfer or redemption of any financial asset relating to a Pledged
Account, and any “entitlement order” as defined in Section 8-102(a)(8) of
the UCC) and instructions (including any “instruction” within the meaning of
Section 9-104 of the UCC) originated by Lender without further action or
consent by Borrower, Manager or any other Person.


 


(d)           Regardless
of any provision in any other agreement, for purposes of the UCC, with respect
to each Pledged Account, New York shall be deemed to be the bank’s jurisdiction
(within the meaning of Section 9-304 of the UCC) and the securities
intermediary’s jurisdiction (within the meaning of Section 8-110 of the
UCC). The Pledged Accounts shall be governed by the laws of the State of New
York.


 


(e)           Except
for the claims and interest of Lender and of Borrower in the Pledged Accounts,
Borrower represents and warrants that it does not know of any Lien on or claim
to, or interest in, any Pledged Account or in any “financial asset” (as defined
in Section 8-102(a) of the UCC) credited thereto.  If any Person asserts any Lien, encumbrance
or adverse claim (including any writ, garnishment, judgment, warrant of
attachment, execution or similar process) against the Pledged Accounts or in
any financial asset carried therein, Borrower will promptly notify Lender
thereof and shall indemnify, defend and hold Lender and each of the Indemnified
Parties harmless from and against any such Lien, encumbrance or claim.


 


Section 2.15.          Security
Agreement.


 


(a)           Pledge
of Pledged Accounts.  To secure the
full and punctual payment and performance of all of the Indebtedness, Borrower
hereby assigns, conveys, pledges and transfers to Lender, as secured party, and
grants Lender a first and continuing security interest in and to, the following
property, whether now owned or existing or hereafter acquired or arising and
regardless of where located (collectively, the “Account Collateral”):


 


(i)  all of
Borrower’s right, title and interest in the Pledged Accounts and all Money and
Permitted Investments, if any, from time to time deposited or held in the
Pledged Accounts or purchased with funds or assets on deposit in the Pledged
Accounts;


 


(ii)  all of
Borrower’s right, title and interest in interest, dividends, Money, Instruments
and other property from time to time received, receivable or otherwise payable
in respect of, or in exchange for, any of the foregoing until such time as such
items are disbursed from the Pledged Accounts; and


 


43

















 


(iii)  to the
extent not covered by clause (i) or (ii) above, all Proceeds of
any or all of the foregoing until such time as such items are disbursed from
the Pledged Accounts.


 


Lender and Collection Account Bank and Local
Collection Account Bank, each as agent for Lender, shall have with respect to
the foregoing collateral, in addition to the rights and remedies herein set
forth, all of the rights and remedies available to a secured party under the
UCC, as if such rights and remedies were fully set forth herein.


 


(b)           Covenants;
Sole Dominion and Control.  So long
as any portion of the Indebtedness is outstanding, Borrower shall not open any
account other than the Local Collection Account for the deposit of Rents or
Money received from Accounts or under Leases and derived from the Mortgaged
Property and all Proceeds to pay amounts owing hereunder, other than any account
for amounts required by law to be segregated by Borrower.  Borrower shall not have any right to
withdraw Money from the Pledged Accounts. 
Borrower acknowledges and agrees that the Pledged Accounts are and shall
at all times continue to be subject to and under the sole dominion and control,
and the “control” within the meaning of Sections 9-104 and 9-106 of the
UCC, of Lender.  Notwithstanding
anything set forth herein to the contrary, neither Borrower nor Manager nor any
other person or entity, through or under Borrower, shall have any control over
the use of, or any right to withdraw any amount from, any Pledged Accounts, and
Borrower  acknowledges that the
Collection Account Bank and the Local Collection Account Bank shall comply with
all instructions originated by Lender without further consent by Borrower.  Borrower acknowledges and agrees that the
Collection Account Bank and Local Collection Account Bank shall comply with the
instructions of Lender with respect to the Pledged Accounts without the further
consent of Borrower or Manager.  The
Account Collateral shall be subject to such applicable laws, and such
applicable regulations of the Board of Governors of the Federal Reserve System
and of any other banking authority or Governmental Authority, as may now or
hereafter be in effect, and to the rules, regulations and procedures of the
financial institution where the Account Collateral is maintained relating to
demand deposit accounts generally from time to time in effect.


 


(c)           Financing
Statements; Further Assurances. 
Borrower hereby irrevocably authorizes Lender at any time and from time
to time to file any financing statements or continuation statements, and
amendments to financing statements, in any jurisdictions and with any filing
offices as Lender may determine, in its sole discretion, are necessary or
advisable to perfect the security interests granted to Lender in connection
herewith.  Such financing statements may
describe the collateral in the same manner as described in any security
agreement or pledge agreement entered into by the parties in connection
herewith or may contain an indication or description of collateral that
describes such property in any other manner as Lender may determine, in its
sole discretion, is necessary, advisable or prudent to ensure the perfection of
the security interest in the collateral granted to Lender in connection
herewith, including, without limitation, describing such property as “all
assets” or “all personal property” of Borrower whether now owned or hereafter
acquired.  From time to time, at the
expense of Borrower, Borrower shall promptly execute and deliver all further
instruments, and take all further action, that Lender may reasonably request,
in order to continue the perfection and protection of the pledge and security
interest granted or purported to be granted hereby.


 


(d)           Transfers
and Other Liens.  Borrower shall not
sell or otherwise dispose of any of the Account Collateral other than pursuant
to the terms of this Agreement and the other Loan Documents, or create or
permit to exist any Lien upon or with respect to all or any of the Account
Collateral, except for the Lien granted to Lender under or as contemplated by
this Agreement.


 


(e)           No
Waiver.  Every right and remedy
granted to Lender under this Agreement or by law may be exercised by Lender at
any time and from time to time, and as often as Lender may deem it
expedient.  Any and all of Lender’s
rights with respect to the pledge of and security interest in the


 


44

















 


Account
Collateral granted hereunder shall continue unimpaired, and to the extent
permitted by law, Borrower shall be and remain obligated in accordance with the
terms hereof, notwithstanding (i) any proceeding of Borrower under the United States
Bankruptcy Code or any bankruptcy, insolvency or reorganization laws or
statutes of any state, (ii) the release or substitution of Account Collateral
at any time, or of any rights or interests therein or (iii) any delay,
extension of time, renewal, compromise or other indulgence granted by Lender in
the event of any Default with respect to the Account Collateral or otherwise
hereunder.  No delay or extension of
time by Lender in exercising any power of sale, option or other right or remedy
hereunder, and no notice or demand which may be given to or made upon Borrower
by Lender, shall constitute a waiver thereof, or limit, impair or prejudice
Lender’s right, without notice or demand, to take any action against Borrower
or to exercise any other power of sale, option or any other right or remedy.


 


(f)            Lender
Appointed Attorney-In-Fact. 
Borrower hereby irrevocably constitutes and appoints Lender as
Borrower’s true and lawful attorney-in-fact, with full power of substitution,
at any time after the occurrence and during the continuation of an Event of
Default, to execute, acknowledge and deliver any instruments and to exercise
and enforce every right, power, remedy, option and privilege of Borrower with
respect to the Account Collateral, and do in the name, place and stead of
Borrower, all such acts, things and deeds for and on behalf of and in the name
of Borrower with respect to the Account Collateral, which Borrower could or
might do or which Lender may deem necessary or desirable to more fully vest in
Lender the rights and remedies provided for herein with respect to the Account
Collateral and to accomplish the purposes of this Agreement.  The foregoing powers of attorney are
irrevocable and coupled with an interest and shall terminate upon repayment of
the Indebtedness in full.


 


(g)           Continuing
Security Interest; Termination. 
This Section 2.15 shall create a continuing pledge of and
security interest in the Account Collateral and shall remain in full force and
effect until payment in full by Borrower of the Indebtedness.  Upon payment in full by Borrower of the
Indebtedness, Lender shall return to Borrower such of the Account Collateral as
shall not have been applied pursuant to the terms hereof, and shall execute such
instruments and documents as may be reasonably requested by Borrower to
evidence such termination and the release of the pledge and lien hereof.


 


Section 2.16.          Mortgage
Recording Taxes.


 


The Lien to be created by the Mortgages is intended to
encumber the Mortgaged Property to the full extent of the Loan Amount; provided,
that, notwithstanding the foregoing, with respect to any Mortgaged Property
located in a state that imposes mortgage recording taxes where the imposition
of a lower amount would allow tax savings to the Borrower, the Lien to be created
by the related Mortgage is intended to encumber the Mortgaged Property in an
amount acceptable to the Lender which amount shall in no event be less than
125% of the value of the Mortgaged Property as determined by the Appraisals.  On the Closing Date, Borrower shall have
paid all state, county and municipal recording and all other taxes imposed upon
the execution and recordation of the Mortgages, if any.


 


Section 2.17.          Extension
Option.  


 


(a)           Borrower
shall have the option (each, an “Extension Option”), to extend the
Maturity Date of the Note for up to three (3) extension terms: (i) the first
extension term from the Original Maturity Date to the Payment Date in February,
2007 (the “First Extended Maturity Date”), (ii) the second extension
term from the First Extended Maturity Date to the Payment Date in February,
2008 (the “Second Extended Maturity Date”), and (iii) the third
extension term from the Second Extended Maturity Date to the Payment Date in
February, 2009 (the “Final Maturity Date”), upon satisfaction of each of
the following conditions (the “Extension Conditions”):


 


45

















 


(i)  Borrower
shall have given written notice (each, an “Extension Notice”) to Lender
not less than sixty (60) days prior to the Original Maturity Date, the First
Extended Maturity Date or the Second Extended Maturity Date, as applicable, of
its election to exercise the first, the second or the third Extension Option,
as the case may be;


 


(ii)  no
Default or Event of Default shall have occurred and be continuing on the
Original Maturity Date, the First Extended Maturity Date or the Second Extended
Maturity Date, as applicable or as of the date of delivery of the Extension
Notice with respect to the applicable Extension Option;


 


(iii)  Borrower
shall have paid to the Lender on the First Extended Maturity Date or the Second
Extended Maturity Date, as applicable, a fee (each, an “Extension Fee”)
equal to the product of 0.25% and the Principal Indebtedness as of the First
Extended Maturity Date or the product of 0.375% and the Principal Indebtedness
as of the Second Extended Maturity Date, as applicable (taking into account any
principal payments projected to be made either on such date) (i.e. no Extension
Fee shall be due and payable on the Original Maturity Date);


 


(iv)  Borrower
shall have purchased an interest rate cap for the term of the extension (or
renewed the existing interest rate cap for such period) in each case from or
with a Qualified Interest Rate Cap Counterparty, with a notional amount equal
to the outstanding Principal Indebtedness and a LIBOR strike rate equal to
5.00% and pursuant to documentation acceptable to Lender and delivered to
Lender a fully executed Collateral Assignment of Hedge; and


 


(v)  Lender
shall have determined that Borrower is in compliance with the Debt Service
Coverage Test.


 


(b)           In
the event Borrower has timely given the Extension Notice to Lender, Lender
shall be required to notify Borrower by not later than the Payment Date prior
to the Original Maturity Date, the First Extended Maturity Date or the Second
Extended Maturity Date, as applicable, of Borrower’s compliance or
non-compliance with the Debt Service Coverage Test.  Borrower may make a voluntary prepayment of the Loan on the
Original Maturity Date, the First Extended Maturity Date or the Second Extended
Maturity Date, as applicable, in order to be in compliance with the Debt
Service Coverage Test on any such date (including from equity capital
contributions from its principals).


 


(c)           Borrower
may revoke any Extension Notice by written notice (or telephonic notice
promptly confirmed in writing) to Lender on or prior to the tenth (10th)
Business Day prior to the Original Maturity Date, the First Extended Maturity
Date or the Second Extended Maturity Date, as applicable; provided, however,
that Borrower shall pay the reasonable out-of-pocket costs incurred by Lender
and in connection with the giving of any Extension Notice and its
revocation.  If the term of the Loan is
extended pursuant to the provisions of this Section 2.17, then all
the other terms and conditions of the Loan Documents shall remain in full force
and effect and unmodified.


 


ARTICLE III.

CONDITIONS PRECEDENT


 


Section 3.1.            Conditions Precedent to Closing  The obligation of the Lender to make the
Loan is subject to the satisfaction by Borrower (and Guarantor, where
applicable) or waiver by Lender in writing of the following conditions no later
than the Closing Date:


 


(a)           Loan
Agreement.  Borrower and Lender
shall have executed and delivered this Agreement.


 


46

















 


(b)           Note.  Borrower shall have executed and delivered
to Lender the Note.


 


(c)           Environmental
Indemnity Agreement; Pledge Agreement; Guaranty of Non-Recourse Obligations;
Interest Rate Cap.  Borrower and
Guarantor shall have executed and delivered the Environmental Indemnity
Agreement to Lender.  Each of the
members of Borrower shall have executed and delivered the Pledge Agreement to
Lender.  Guarantor shall have executed
and delivered the Guaranty of Non-Recourse Obligations.  Borrower shall have delivered to Lender the
interest rate cap in a form acceptable to Lender from a Qualified Interest Rate
Cap Provider with a notional amount equal to the Loan Amount and a LIBOR strike
rate equal to 5.00% and the fully executed Collateral Assignment of Hedge.


 


(d)           Opinions
of Counsel.  Lender shall have
received from counsel to Borrower, the General Partner, the Member and the
Guarantor, legal opinions in form and substance acceptable to Lender, with
respect to corporate matters and with respect to substantive non-consolidation
of Affordable Residential Communities LP, the Member and the Manager, on the
one hand, and Borrower and General Partner, on the other, in the event of the
bankruptcy of Affordable Residential Communities LP, the Member or the
Manager.  Such legal opinions shall be
addressed to Lender and its successors and assigns, dated the Closing Date, and
in form and substance reasonably satisfactory to Lender and its counsel.


 


(e)           Organizational
Documents.  Lender shall have
received with respect to each of Borrower, the Member, the General Partner and
the Guarantor its certificate of formation, certificate of limited partnership
or certificate of incorporation, as applicable, as amended, modified or
supplemented to the Closing Date, as filed with the Secretary of State in the
jurisdiction of organization and in effect on the Closing Date and certified to
be true, correct and complete by the appropriate Secretary of State as of a
date not more than thirty (30) days prior to the Closing Date, together with a
good standing certificate from such Secretary of State dated not more than
thirty (30) days prior to the Closing Date and, for Borrower, the Member and
the General Partner to the extent required by applicable law, a good standing
certificate from the Secretaries of State (or the equivalent thereof) of each
other State in which Borrower, the Member or General Partner is required to be
qualified to transact business, each dated not more than thirty (30) days prior
to the Closing Date.


 


(f)            Certified
Resolutions, etc.  Lender shall have
received a certificate of each of Borrower, General Partner, Member and the
Guarantor dated the Closing Date, certifying (i) the names and true signatures
of its incumbent officers authorized to sign the Loan Documents to which
Borrower, the General Partner, the Member or the Guarantor is a party, (ii) the
Organizational Agreement of each of Borrower, the General Partner, the Member
and Guarantor, in each case as in effect on the Closing Date, (iii) the
resolutions of each of Borrower, the General Partner, the Member and the
Guarantor, approving and authorizing the execution, delivery and performance of
the Loan Documents to which it is a party, and (iv) that there have been no
changes in any Organizational Agreement since the date of execution or
preparation thereof.


 


(g)           Additional
Matters.  Lender shall have received
such other certificates, opinions, documents and instruments relating to the
Loan as may have been reasonably requested by Lender.  All corporate and other organizational proceedings, all other
documents (including, without limitation, all documents referred to herein and
not appearing as exhibits hereto) and all legal matters in connection with the
Loan shall be reasonably satisfactory in form and substance to Lender in its
sole and absolute discretion.


 


(h)           Transaction
Costs.  Borrower shall have paid all
Transaction Costs for which bills have been submitted in accordance with the
provisions of Section 8.23.


 


47

















 


(i)            No
Default or Event of Default.  No
event which would constitute either a Default or Event of Default under this
Agreement or the other Loan Documents shall have occurred and be continuing on
the Closing Date.


 


(j)            No
Injunction.  No law or regulation
shall have been adopted, no order, judgment or decree of any Governmental
Authority shall have been issued, and no litigation shall be pending or
threatened, which in the good faith judgment of Lender would enjoin, prohibit
or restrain, or impose or result in the imposition of any material adverse
condition upon, the making or repayment of the Loan or the consummation of the
Transaction.


 


(k)           Representations
and Warranties.  The representations
and warranties herein and in the other Loan Documents shall be true and correct
in all material respects on the Closing Date.


 


(l)            Survey;
Appraisal.  Lender shall have
received the Survey and the Appraisal with respect to each Mortgaged Property,
which shall be in form and substance satisfactory to Lender in its sole and
absolute discretion.


 


(m)          Property
Condition Assessment.  Lender shall
have received the Property Condition Assessment with respect to each Mortgaged
Property prepared by the Engineer or another Person acceptable to the Lender,
which Property Condition Assessment shall be acceptable to Lender in its sole
and absolute discretion.


 


(n)           Environmental
Matters.  Lender shall have received
an Environmental Report prepared by an Environmental Auditor with respect to
the Mortgaged Property, which Environmental Report shall be acceptable to
Lender in its sole and absolute discretion.


 


(o)           Financial
Information.  Lender shall have
received financial information relating to the Guarantor, Borrower and the
Mortgaged Property satisfactory to Lender in its sole and absolute
discretion.  Such information shall
include, without limitation, the following, to the extent reasonably available:


 


(i)  operating
statements for the current year (including actual to date information, an
annual budget and trailing twelve month data in hard copy and on diskette) and
for not less than the three preceding years;


 


(ii) a copy of the standard lease form, if any;


 


(iii) current property rent roll data on a tenant by
tenant basis in hard copy including the name of each tenant and the associated
Homesite, security deposit, amount due at the beginning of the month, charges
in the current month (including Homesite rent, water/sewer, gas/electric,
trash, mobile home rent, notes and other charges), payments made during the
month, amount due at the end of the month, total Homesites at the Mortgaged
Property and total occupied Homesites at the Mortgaged Property (with the
occupancy level expressed as a percentage);


 


(iv) the tax bills for 2003 and the historical tax
records for 2002;


 


(v) the most recent annual financial statements and
unaudited quarterly financial statements; and


 


(vi) such other financial information as is
customarily required by institutional lenders for loans similar in size and
type as the Loan.


 


48

















 


The annual financial statements relating to the
Guarantor shall be either (x) audited by a “Big Four” accounting firm or
another firm of certified public accountants reasonably acceptable to Lender or
(y) prepared in accordance with agreed upon procedures reasonably acceptable to
Lender to be performed by a “Big Four” accounting firm or another firm of
certified public accountants reasonably acceptable to Lender to create similar
information.


 


(p)           Pro-Forma
Financial Statement; Operating Budget. 
Lender shall have received (i) the initial pro-forma financial
statement and Operating Budget for the Mortgaged Property for the following
twelve months (including on an annual and monthly basis a break-down of
projected Gross Revenues, Property Expenses, Capital Improvement Costs,
replacement reserve costs and average occupancy level (expressed as a
percentage)) and (ii) a financial statement that forecasts projected revenues
and operating expenses for not less than three years (including the assumptions
used in such forecast).


 


(q)           Site
Inspection.  Borrower shall have
provided to Lender the opportunity to perform, or cause to be performed on its
behalf, an on-site due diligence review of the Mortgaged Property, which
inspection is satisfactory to Lender in its sole discretion.


 


(r)            Mortgaged
Property Documents.


 


(i) Mortgages; Assignments of Rents and Leases.  Borrower shall have executed and delivered
to Lender the Mortgages and the Assignments of Rents and Leases with respect to
the Mortgaged Property and such Mortgages and Assignments of Rents and Leases
shall have been filed of record in the appropriate filing office in the
jurisdiction in which the Mortgaged Property is located or irrevocably
delivered to a title agent for such recordation.


 


(ii) Financing Statements.  Borrower shall have executed and delivered
to Lender all financing statements required by Lender pursuant hereto and such
financing statements shall have been filed of record in the appropriate filing
offices in each of the appropriate jurisdictions or irrevocably delivered to a
title agent for such recordation.


 


(iii) Management Agreement and Manager’s
Subordination.  Lender shall have
received the executed Management Agreement for the Mortgaged Property and the
Manager shall have executed and delivered the Manager’s Subordination to
Lender.


 


(iv) Contract Assignment.  With respect to the Mortgaged Property,
Borrower shall have executed and delivered to Lender a Contract Assignment with
respect to the Mortgaged Property.


 


(s)           Opinions
of Counsel.  Lender shall have
received from counsel to Borrower reasonably acceptable to Lender in each state
in which any Mortgaged Property is located its legal opinion in form and
substance satisfactory to Lender, as to (i) the enforceability of the
Mortgages, Assignments of Rents and Leases and any other Loan Documents
governed by the law of such jurisdiction, (ii) perfection of Liens and security
interests and (iii) other matters referred to therein with respect to each
Mortgaged Property.  The legal opinions
will be addressed to Lender and its successors and assigns, dated the Closing
Date, and in form and substance reasonably satisfactory to Lender and its
counsel.


 


(t)            Insurance.  Lender shall have received certificates of
insurance demonstrating insurance coverage in respect of each Mortgaged
Property of types, in amounts, with insurers and otherwise in compliance with
the terms, provisions and conditions set forth in this Agreement.  Such certificates shall indicate that Lender
is a named additional insured and shall contain a loss payee


 


49

















 


endorsement
in favor of Lender with respect to the property policies required to be
maintained under this Agreement.


 


(u)           Title
Insurance Policy.  Lender shall have
received countersigned pro forma title policies or marked binders constituting
the unconditional commitment (in form and substance reasonably satisfactory to
Lender) to issue the Title Insurance Policy covering the Mortgaged Property
with an aggregate amount at least equal to the Loan Amount.


 


(v)           Lien
Search Reports.  Lender shall have
received satisfactory reports of UCC (collectively, the “UCC Searches”),
tax lien, judgment and litigation searches and title updates conducted by the
companies issuing the Title Insurance Policy with respect to the Collateral,
Guarantor, Borrower, the General Partner and the Member, such searches to be
conducted in each of the locations required by Lender.


 


(w)          Consents,
Licenses, Approvals, etc.  Lender
shall have received copies of all consents, licenses and approvals, if any,
required in connection with the execution, delivery and performance by
Borrower, Member and Guarantor and the validity and enforceability, of the Loan
Documents, and such consents, licenses and approvals shall be in full force and
effect.


 


(x)            Additional
Real Estate Matters.  Lender shall
have received such other real estate related certificates and documentation relating
to the Mortgaged Property as Lender may have reasonably requested.  Such documentation shall include the
following as requested by Lender and to the extent reasonably available:


 


(i) certificates of occupancy issued by the
appropriate Governmental Authorities of the jurisdiction in which each
Mortgaged Property is located reflecting, and consistent with, the use of each
Mortgaged Property as of the Closing Date;


 


(ii) letters from the appropriate local Governmental
Authorities of the jurisdiction in which each Mortgaged Property is located,
certifying that each Mortgaged Property is in compliance with all applicable
zoning laws, rules and regulations, a zoning endorsement to the applicable
Title Insurance Policy with respect to each Mortgaged Property and/or an
acceptable zoning letter from Zoning Information Services Inc.;


 


(iii) copies of the Leases in effect at each Mortgaged
Property as Lender may request (in addition to the copies delivered above); and


 


(iv) a certified copy of the purchase and sale
agreement (with exhibits), if any, for the Mortgaged Property.


 


(y)           Closing
Statement.  Lender and Borrower
shall have agreed upon a detailed closing statement in a form reasonably
acceptable to Lender, which includes a complete description of Borrower’s
sources and uses of funds on the Closing Date.


 


(z)            Loan-to-Value
Ratio; Debt Service Coverage Test. 
Lender shall have determined that (i) the Loan Amount is not greater
than 80% of the aggregate value of the Mortgaged Property as set forth in the
Appraisals delivered on the Closing Date and (ii) the Debt Service Coverage
Test is satisfied as of the Closing Date.


 


(aa)         Origination
Fee.  Lender shall have received its
Origination Fee, which may be retained by Lender from the proceeds of the Loan.


 


50

















 


Section 3.2.            Execution
and Delivery of Agreement.  The
execution and delivery of this Agreement by each party to this Agreement shall
be deemed to constitute the satisfaction or waiver of the conditions set forth
in Section 3.1; provided, that any such deemed satisfaction
or waiver shall be solely for the purposes of Section 3.1 and shall
not be deemed or construed to constitute a waiver of any other provision of
this Agreement or of any provisions of any of the other Loan Documents,
including, without limitation, any undelivered items undertaking or agreement
or other post-closing agreement or undertaking entered into by Borrower and/or
Guarantor.


 


ARTICLE IV.

REPRESENTATIONS AND WARRANTIES


 


Section 4.1.            Representations
and Warranties as to Borrower. 
Borrower represents and warrants that, as of the Closing Date:


 


(a)           Organization.  Borrower (i) is a duly organized and validly
existing limited liability company in good standing under the laws of the State
of Delaware or limited partnership in good standing under the laws of the State
of Delaware, (ii) has the requisite power and authority to own its properties
(including, without limitation, the Mortgaged Property) and to carry on its
business as now being conducted and is qualified to do business in the
jurisdiction in which the Mortgaged Property is located, and (iii) has the
requisite power to execute and deliver, and perform its obligations under, this
Agreement, the Note and all of the other Loan Documents to which it is a party.


 


(b)           Authorization;
No Conflict; Consents and Approvals. 
The execution and delivery by Borrower of this Agreement, the Note and
each of the other Loan Documents, Borrower’s performance of its obligations
hereunder and under the other Loan Documents and the creation of the security
interests and liens provided for in this Agreement and the other Loan Documents
to which it is a party (i) have been duly authorized by all requisite action on
the part of Borrower, (ii) will not violate any provision of any Legal
Requirements, any order of any court or other Governmental Authority, the
Organizational Agreement or any indenture or agreement or other instrument to
which Borrower is a party or by which Borrower is bound, and (iii) will not be in
conflict with, result in a breach of, or constitute (with due notice or lapse
of time or both) a default under, or result in the creation or imposition of
any Lien of any nature whatsoever upon the Mortgaged Property pursuant to, any
such indenture or agreement or material instrument other than the Loan
Documents.  Other than those obtained or
filed on or prior to the Closing Date, Borrower is not required to obtain any
consent, approval or authorization from, or to file any declaration or
statement with, any Governmental Authority or other agency in connection with
or as a condition to the execution, delivery or performance of this Agreement,
the Note or the other Loan Documents executed and delivered by Borrower.


 


(c)           Enforceability.  This Agreement, the Note and each other Loan
Document executed by Borrower in connection with the Loan (including, without
limitation, any Collateral Security Instrument), is the legal, valid and
binding obligation of Borrower, enforceable against Borrower in accordance with
its terms, subject to bankruptcy, insolvency, and other limitations on
creditors’ rights generally and to equitable principles.  This Agreement, the Note and such other Loan
Documents are not subject to any right of rescission, set-off, counterclaim or
defense by Borrower (including the defense of usury), and Borrower has not
asserted any right of rescission, set-off, counterclaim or defense with respect
thereto.


 


(d)           Litigation.  There are no actions, suits or proceedings
at law or in equity by or before any Governmental Authority or other agency now
pending and served or, to the best knowledge of Borrower, threatened against
Borrower, Guarantor or any Collateral, which actions, suits or proceedings,


 


51

















 


if determined against Borrower, Guarantor or such Collateral, are
reasonably likely to result in a Material Adverse Effect.


 


(e)           Agreements.  Borrower is not in default in the
performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any agreement or instrument to which it is
a party or by which Borrower or any Collateral is bound which default is
reasonably likely to have a Material Adverse Effect.  Neither Borrower nor Guarantor is a party to any agreement or
instrument or subject to any restriction which restricts such Person’s ability
to conduct its business in the ordinary course or that is reasonably likely to
have a Material Adverse Effect.


 


(f)            No
Bankruptcy Filing.  Neither Borrower
nor Guarantor is contemplating either the filing of a petition by it under any
state or federal bankruptcy or insolvency laws or the liquidation of all or a
material portion of its assets or property. 
To the best knowledge of Borrower, no Person is contemplating the filing
of any such petition against Borrower.


 


(g)           Solvency.  Giving effect to the transactions
contemplated hereby, the fair market value of Borrower’s assets exceeds and
will, immediately following the making of the Loan, exceed Borrower’s total
liabilities (including, without limitation, subordinated, unliquidated,
disputed and contingent liabilities). 
The fair market value of Borrower’s assets is and will, immediately
following the making of the Loan, be greater than Borrower’s probable
liabilities (including the maximum amount of its contingent liabilities on its
debts as such debts become absolute and matured).  Borrower’s assets do not and, immediately following the making of
the Loan will not, constitute unreasonably small capital to carry out its business
as conducted or as proposed to be conducted. 
Borrower does not intend to, and does not believe that it will, incur
debts and liabilities (including, without limitation, contingent liabilities
and other commitments) beyond its ability to pay such debts as they mature
(taking into account the timing and amounts to be payable on or in respect of
obligations of Borrower).


 


(h)           Other
Debt.  Borrower has not borrowed or
received other debt financing whether unsecured or secured by the Mortgaged
Property or any part thereof which is outstanding as of the Closing Date.  As of the Closing Date, Borrower has no
Other Borrowings other than trade debt expressly permitted under Article VIII
of this Agreement.


 


(i)            Full
and Accurate Disclosure.  No
statement of fact made by or on behalf of Borrower in this Agreement or in any
of the other Loan Documents contains any untrue statement of material fact or
omits to state any material fact necessary to make statements contained herein
or therein not misleading.  To the best
knowledge of Borrower, no financial statements or any other document,
certificate or written statement furnished to Lender by Borrower or Guarantor,
or by any third party on behalf of Borrower or Guarantor, for use in connection
with the Loan contains any untrue representation, warranty or statement of a
material fact, and none omits or will omit to state a material fact necessary
in order to make the statements contained herein or therein not
misleading.  To the best knowledge of
Borrower, there is no fact that has not been disclosed to Lender that is
reasonably likely to result in a Material Adverse Effect.


 


(j)            Financial
Information.  All financial
statements and other data concerning Borrower, Guarantor and the Mortgaged
Property that has been delivered by or on behalf of Borrower or Guarantor to
Lender is true, complete and correct in all material respects and, except as
disclosed on Schedule 4 attached hereto, has been prepared in accordance with
GAAP.  Since the delivery of such data,
except as otherwise disclosed in writing to Lender, there has been no change in
the financial position of Borrower, Guarantor or the Mortgaged Property, or in
the results of operations of Borrower or Guarantor, which change results or is
reasonably likely to result in a Material Adverse Effect.  Neither Borrower nor Guarantor has incurred
any obligation or liability, contingent or otherwise, not reflected in such
financial


 


52

















 


data,
which is likely to have a Material Adverse Effect upon its business operations
or the Mortgaged Property.


 


(k)           Investment
Company Act; Public Utility Holding Company Act.  Borrower is not (i) an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment
Company Act of 1940, as amended, (ii) a “holding company” or a “subsidiary
company” of a “holding company” or an “affiliate” of either a “holding company”
or a “subsidiary company” within the meaning of the Public Utility Holding
Company Act of 1935, as amended, or (iii) subject to any other federal or
state law or regulation which purports to restrict or regulate its ability to
borrow money in accordance with this Agreement.


 


(l)            Compliance.  Borrower is in compliance with all
applicable Legal Requirements, except for noncompliance that is not reasonably
likely to have a Material Adverse Effect. 
Borrower is not in default or violation of any order, writ, injunction,
decree or demand of any Governmental Authority except for defaults or violations
which are not reasonably likely to have a Material Adverse Effect.


 


(m)          Use
of Proceeds; Margin Regulations. 
Borrower will use the proceeds of the Loan for the purposes described in
Section 2.2.  No part of the
proceeds of the Loan will be used for the purpose of purchasing or acquiring
any “margin stock” within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System or for any other purpose which would be
inconsistent with such Regulation U or any other Regulations of such Board of
Governors, or for any purposes prohibited by Legal Requirements.


 


(n)           Organizational
Chart.  The organizational chart set
forth as Schedule 7 accurately sets forth the direct and indirect
ownership structure of Borrower.


 


(o)           No
Defaults.  No Default or Event of
Default exists under or with respect to any Loan Document.


 


(p)           Plans
and Welfare Plans.  The assets of
Borrower are not treated as “plan assets” under regulations currently
promulgated under ERISA.  Neither
Borrower nor any ERISA Affiliate sponsors, maintains, contributes to or is
required to contribute to any Plan or Multiemployer Plan nor has the Borrower
or any ERISA Affiliate sponsored, maintained, contributed to or been required
to contribute to any Plan or Multiemployer Plan within the past six years.  There are no pending issues or claims before
the Internal Revenue Service, the United States Department of Labor or any
court of competent jurisdiction related to any Plan or Welfare Plan.  No event has occurred, and there exists no
condition or set of circumstances, in connection with any Plan or Welfare Plan
under which Borrower or, to the best knowledge of Borrower, any ERISA
Affiliate, directly or indirectly (through an indemnification agreement or
otherwise), is reasonably likely to be subject to any material risk of
liability under Section 409 or 502(i) of ERISA or Section 4975 of the
Code.  No Welfare Plan provides or will
provide benefits, including, without limitation, death or medical benefits
(whether or not insured) with respect to any current or former employee of
Borrower, or, to the best knowledge of Borrower, any ERISA Affiliate beyond his
or her retirement or other termination of service other than (i) coverage
mandated by applicable law, (ii) death or disability benefits that have been
fully provided for by fully paid up insurance or (iii) severance benefits.


 


(q)           Additional
Borrower UCC Information. 
Borrower’s organizational identification numbers are:  20-0428188 (ARC Communities 18 LLC),
20-0558829 (ARC 18 FLD LLC), 3743937 (ARC 18 FLSH LLC), 20-0559151 (ARC 18
FLWHO LLC) , and 3750361 (ARCTX LP) and the full legal name of Borrower is as
set forth on the signature pages hereof and Borrower has not done in the last


 


53

















 


five (5)
years, and does not do, business under any other name (including any trade-name
or fictitious business name).


 


(r)            Not
Foreign Person.  Borrower is not a
“foreign person” within the meaning of § 1445(f)(3) of the Code.


 


(s)           Labor
Matters.  Borrower is not a party to
any collective bargaining agreements.


 


(t)            Pre-Closing
Date Activities.  Borrower has not
conducted any business or other activity on or prior to the Closing Date, other
than in connection with the acquisition, management and ownership of the
Mortgaged Property.


 


(u)           No
Bankruptcies or Criminal Proceedings Involving Borrower or Related Parties.  No bankruptcy, insolvency, reorganization or
comparable proceedings have ever been instituted by or against Borrower, any
Affiliate of Borrower, any Guarantor or any individual or entity owning, with
his, her or its family members, 20% or more of the direct, or indirect
beneficial ownership interests in Borrower (each such Guarantor, individual, or
entity being herein referred to as a “Principal”), and no such proceeding is
now pending or contemplated.  None of
Borrower, any Principal, or to Borrower’s knowledge, any other individual or
entity directly or indirectly owning or controlling, or the family members of
which own or control, any direct or indirect beneficial ownership interest in
Borrower or in the Manager or asset manager for the Mortgaged Property, have
been charged, indicted or convicted, or are currently under the threat of
charge, indictment or conviction, for any felony or crime punishable by
imprisonment.


 


(v)           No
Prohibited Persons.  Neither
Borrower, Member, Guarantor nor any of their respective officers, directors,
shareholders, partners, members or Affiliates (including the indirect holders
of equity interests in Borrower) is or will be an entity or person:
(i) that is listed in the Annex to, or is otherwise subject to the
provisions of Executive Order 13224 issued on September 24, 2001 (“EO13224”);
(ii) whose name appears on the United States Treasury Department’s Office
of Foreign Assets Control (“OFAC”) most current list of “Specifically
Designated National and Blocked Persons” (which list may be published from time
to time in various mediums including, but not limited to, the OFAC website,
http:www.treas.gov/ofac/t11sdn.pdf)(the “OFAC List”); (iii) who
commits, threatens to commit or supports “terrorism”, as that term is defined
in EO 13224; or (iv) who is otherwise affiliated with any entity or person
listed above (any and all parties or persons described in clauses (i) through
(iv) above are herein referred to as a “Prohibited Person”).   To the best knowledge of the Borrower, no
tenant at the Property currently is identified on the OFAC List or otherwise
qualifies as a Prohibited Person and no tenant at the Property is owned by or an
Affiliate of a Prohibited Person. 
Borrower and Manager have implemented and will continue to follow
procedures to ensure that no tenant at the Property is a Prohibited Person or
owned by or an Affiliate of a Prohibited Person.


 


Section 4.2.            Representations
and Warranties as to the Mortgaged Property.  Borrower hereby represents and warrants to Lender that, as to
each Mortgaged Property and the Mortgages, as of the Closing Date:


 


(a)           Title
to the Mortgaged Property.  Borrower
owns good, marketable and insurable fee simple title to each Mortgaged Property
(other than Personalty), free and clear of all Liens, other than the Permitted
Encumbrances.  Borrower owns the
Personalty free and clear of any and all Liens, other than Permitted
Encumbrances.  There are no outstanding
options to purchase or rights of first refusal or restrictions on
transferability affecting any Mortgaged Property or any portion thereof or
interest therein.


 


54

















 


(b)           Utilities
and Public Access.  Except as
disclosed on Schedule 4, (i) each Mortgaged Property has adequate rights of
access to public ways and is served by public water, electric, sewer, sanitary
sewer and storm drain facilities; (ii) all public utilities necessary to the
continued use and enjoyment of each Mortgaged Property as presently used and
enjoyed are located in the public right-of-way abutting the premises, and all
such utilities are connected so as to serve each Mortgaged Property without
passing over other property except for land or easement areas of or available
to the utility company providing such utility service; and (iii) all roads
necessary for the full utilization of each Mortgaged Property for its current
purpose have been completed and dedicated to public use and accepted by all
Governmental Authorities or are the subject of access easements for the benefit
of each Mortgaged Property.


 


(c)           Condemnation.  No Taking has been commenced or, to the best
of Borrower’s knowledge, is contemplated with respect to all or any portion of
any Mortgaged Property or for the relocation of roadways providing access to
any Mortgaged Property.


 


(d)           Compliance.  Each Mortgaged Property and the current use
thereof is in compliance with all applicable Legal Requirements (including, without
limitation, building, parking, subdivision, land use, health, fire, safety and
zoning ordinances and codes) and all applicable Insurance Requirements, except
for noncompliance which cannot reasonably be expected to result in a Material
Adverse Effect.  Each Mortgaged Property
is zoned for its current use, which zoning designation is unconditional, in
full force and effect, and is beyond all applicable appeal periods.   In the event that all or any part of the
Improvements located on any Mortgaged Property are destroyed or damaged, said
Improvements can be legally reconstructed to their condition prior to such
damage or destruction, and thereafter exist for the same use without violating
any zoning or other ordinances applicable thereto and without the necessity of
obtaining any variances or special permits, other than customary demolition,
building and other construction related permits.  No legal proceedings are pending or, to the knowledge of
Borrower, threatened with respect to the zoning of the Mortgaged Property.  Neither the zoning nor any other right to
construct, use or operate the Mortgaged Property is in any way dependent upon
or  related to any real estate other than
the Mortgaged Property.  No tract map,
parcel map, condominium plan, condominium declaration, or plat of subdivision
will be recorded by Borrower with respect to the Mortgaged Property without
Lender’s prior written consent.


 


(e)           Environmental
Compliance.  Except for matters set
forth in the Environmental Reports delivered to Lender in connection with the
Loan (true, correct and complete copies of which have been provided to Lender
by Borrower):


 


(i) Borrower and each Mortgaged Property is in full
compliance with all applicable Environmental Laws (which compliance includes,
but is not limited to, the possession by Borrower or the Manager of all
environmental, health and safety permits, licenses and other governmental
authorizations required in connection with the ownership and operation of the
Mortgaged Property under all Environmental Laws), except for noncompliance
which cannot reasonably be expected to result in a Material Adverse Effect.


 


(ii) There is no material Environmental Claim pending
or, to the actual knowledge of Borrower, threatened, and no penalties arising
under Environmental Laws have been assessed against Borrower, the Manager or
any Mortgaged Property, or, to the actual knowledge of Borrower, against any
Person whose liability for any Environmental Claim Borrower or the Manager has
or may have retained or assumed either contractually or by operation of law,
and no material investigation or review is pending or, to the actual knowledge
of Borrower, threatened by any Governmental Authority, citizens group, employee
or other Person with respect to any alleged failure by Borrower or the Manager
or any Mortgaged Property to have any


 


55

















 


environmental,
health or safety permit, license or other authorization required under, or to
otherwise comply with, any Environmental Law or with respect to any alleged
liability of Borrower or the Manager for any Use or Release of any Hazardous
Substances.


 


(iii) There are no present and, to the best knowledge
of the Borrower, there have been no past material Releases of any Hazardous
Substances that are reasonably likely to form the basis of any Environmental
Claim against Borrower, the Manager, any Mortgaged Property or against any
Person whose liability for any Environmental Claim Borrower or the Manager has
or may have retained or assumed either contractually or by operation of law
(other than Hazardous Substances being used in amounts that are customary for
properties such as the Mortgaged Property and for purposes that are typical for
properties such as the Mortgaged Property and in all cases are utilized in
compliance with Environmental Law in all material respects).


 


(iv) Without limiting the generality of the foregoing,
to the best knowledge of the Borrower, there is not present at, on, in or under
any Mortgaged Property, any Hazardous Substances (including, without
limitation, PCB-containing equipment, asbestos or asbestos containing
materials, underground storage tanks or surface impoundments for Hazardous
Substances, lead in drinking water or lead based paint) (other than Hazardous Substances
being used in amounts that are customary for properties such as the Mortgaged
Property and for purposes that are typical for properties such as the Mortgaged
Property and in all cases are utilized in compliance with Environmental Law in
all material respects) or any fungus, mold, mildew or biological agent the
presence of which is reasonably likely to materially adversely affect the value
or utility of such Mortgaged Property.


 


(v) No liens are presently recorded with the
appropriate land records under or pursuant to any Environmental Law with
respect to the Mortgaged Property and no Governmental Authority has been taking
or, to the actual knowledge of Borrower, is in the process of taking any action
that could subject the Mortgaged Property to Liens under any Environmental Law.


 


(vi) There have been no environmental investigations,
studies, audits, reviews or other analyses conducted by or that are in the
possession of Borrower in relation to any Mortgaged Property which have not
been made available to Lender.


 


(f)            Mortgage
and Other Liens.  Each Mortgage
creates a valid and enforceable first priority Lien on the applicable Mortgaged
Property described therein, as security for the repayment of the Indebtedness,
subject only to the Permitted Encumbrances applicable to such Mortgaged
Property.  This Agreement creates a
valid and enforceable first priority Lien on all Account Collateral.  Each Collateral Security Instrument establishes
and creates a valid, subsisting and enforceable Lien on and a security interest
in, or claim to, the rights and property described therein.  All property covered by any Collateral
Security Instrument in which a security interest can be perfected by the filing
of a financing statement is subject to a UCC financing statement filed and/or
recorded, as appropriate (or irrevocably delivered to an agent for such
recordation or filing) in all places necessary to perfect a valid first
priority Lien with respect to the rights and property that are the subject of
such Collateral Security Instrument to the extent governed by the UCC.


 


(g)           Assessments.  There are no pending or, to the best
knowledge of Borrower, proposed special or other assessments for public
improvements or otherwise affecting any Mortgaged Property, nor are there any
contemplated improvements to any Mortgaged Property that may result in such
special or other assessments.


 


56

















 


(h)           No
Joint Assessment; Separate Lots. 
Borrower has not suffered, permitted or initiated the joint assessment
of the Mortgaged Property (i) with any other real property constituting a
separate tax lot, and (ii) with any portion of the Mortgaged Property which may
be deemed to constitute personal property, or any other procedure whereby the
lien of any taxes which may be levied against such personal property shall be
assessed or levied or charged to the Mortgaged Property as a single lien.  The Mortgaged Property is comprised of one
or more parcels, each of which constitutes a separate tax lot and none of which
constitutes a portion of any other tax lot.


 


(i)            No
Prior Assignment.  Lender is the
collateral assignee of Borrower’s interest under the Leases.  There are no prior assignments of the Leases
or any portion of the Rent due and payable or to become due and payable which
are presently outstanding.


 


(j)            Permits;
Certificate of Occupancy.  Borrower
has obtained all Permits necessary to the use and operation of each Mortgaged
Property, except where the failure to obtain such Permits is not reasonably
likely to result in a Material Adverse Effect. 
The use being made of each Mortgaged Property is in conformity with the
certificate of occupancy and/or such Permits for such Mortgaged Property and
any other restrictions, covenants or conditions affecting such Mortgaged
Property, except for nonconformity which is not reasonably likely to result in
a Material Adverse Effect.


 


(k)           Flood
Zone.  Except as shown on the
Survey, no Mortgaged Property or any portion thereof is located in a flood
hazard area as defined by the Federal Insurance Administration.


 


(l)            Physical
Condition.  Except as set forth in
the Property Condition Assessment, to the best knowledge of Borrower, each
Mortgaged Property is free of structural defects and all Improvements,
including the building systems contained therein are in good working order
subject to ordinary wear and tear.


 


(m)          Security
Deposits.  Borrower and the Manager
are in compliance in all material respects with all Legal Requirements relating
to all security deposits with respect to each Mortgaged Property.


 


(n)           Intellectual
Property.  All material Intellectual
Property that Borrower owns or has pending, or under which it is licensed, are
in good standing and uncontested.  There
is no right under any Intellectual Property necessary to the business of
Borrower as presently conducted or as Borrower contemplates conducting its
business.  Borrower has not infringed,
is not infringing, and has not received notice of infringement with respect to
asserted Intellectual Property of others. 
There is no infringement by others of material Intellectual Property of
Borrower.


 


(o)           No
Encroachments.  Except as shown on
the Survey, to the best knowledge of Borrower, (i) all of the Improvements
which were included in determining the appraised value of each Mortgaged
Property lie wholly within the boundaries and building restriction lines of
each Mortgaged Property, (ii) no improvements on adjoining properties encroach
upon any Mortgaged Property, (iii) no Improvements encroach upon any easements
or other encumbrances affecting the Mortgaged Property, and (iv) all of the
Improvements comply with all material requirements of any applicable zoning and
subdivision laws and ordinances.


 


(p)           Management
Agreement.  The Management Agreement
is in full force and effect.  There is
no default, breach or violation existing thereunder by Borrower or, to the best
knowledge of  Borrower, any other party
thereto and no event (other than payments due but not yet delinquent) which,
with the passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach or violation by Borrower or, to the
best knowledge of Borrower, any other


 


57

















 


party
thereunder or entitle Borrower or, to the best knowledge of Borrower, any other
party thereto to terminate any such agreement.


 


(q)           Leases.  No Mortgaged Property is subject to any
Leases other than the Leases described in the rent rolls delivered to Lender in
connection with the making of the Loan. 
No person has any possessory interest in any Mortgaged Property or right
to occupy the same except under and pursuant to the provisions of the
Leases.  The current Leases are in full
force and effect and, except as set forth on the rent rolls delivered to Lender
in connection with the making of the Loan or as disclosed on Schedule 4,
there are no monetary or other material defaults thereunder by either party and
no conditions which with the passage of time and/or notice would constitute
monetary or other material defaults thereunder.  Except as disclosed on Schedule 4, no portion of the
Mortgaged Property is leased to or occupied by any Affiliate of Borrower.  Except as disclosed on Schedule 4,
all Leases at each Mortgaged Property consist solely of Leases of Homesites and
related common areas, and not of other portions of the Mortgaged Property.  Except as disclosed on Schedule 4,
Borrower does not own any manufactured homes or mobile homes, whether or not
located at the Mortgaged Property.  No
material termination payments or fees are due in the event Borrower cancels or
terminates any commercial Leases to which it is a party.


 


Section 4.3.            Survival
of Representations.  Borrower agrees
that (i) all of the representations and warranties of Borrower set forth in Section 4.1
and 4.2 and in the other Loan Documents delivered on the Closing Date
are made as of the Closing Date, and (ii) all representations and warranties
made by Borrower shall survive the delivery of the Note and making of the Loan and
continue for so long as any amount remains owing to Lender under this
Agreement, the Note or any of the other Loan Documents; provided, however,
that the representations set forth in Section 4.2(e) shall survive
for five (5) years following repayment of the Indebtedness.  All representations, warranties, covenants
and agreements made in this Agreement or in the other Loan Documents shall be
deemed to have been relied upon by Lender notwithstanding any investigation
heretofore or hereafter made by Lender or on Lender’s behalf.


 


ARTICLE V.

AFFIRMATIVE COVENANTS


 


Section 5.1.            Affirmative
Covenants.  Borrower covenants and
agrees that, from the date hereof and until payment in full of the
Indebtedness:


 


(a)           Existence;
Compliance with Legal Requirements: Insurance.  Borrower shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its existence as a limited
liability company, and any rights, licenses, Permits and franchises necessary
for the conduct of its business and will comply with all Legal Requirements and
Insurance Requirements applicable to it and to each Mortgaged Property in all
material respects.  Borrower shall at
all times maintain, preserve and protect all franchises and trade names and
preserve all the remainder of its property necessary for the continued conduct
of its business and keep the Mortgaged Property in good repair, working order
and condition, except for reasonable wear and use (and except for casualty
losses as to which other provisions hereof shall govern), and from time to time
make, or cause to be made, all reasonably necessary repairs, renewals,
replacements, betterments and improvements thereto.


 


(b)           Basic
Carrying Costs and Other Claims; Contest.


 


(i) Subject to Borrower’s contest rights set forth in Section 5.1(b)(ii)
below, Borrower will pay when due (A) all Basic Carrying Costs with respect to
Borrower and the Mortgaged Property; (B) all claims (including claims for
labor, services, materials and supplies) for sums that


 


58

















 


have become due and payable and that
by law have or may become a Lien upon any of the Mortgaged Property or its
other properties or assets (hereinafter referred to as the “Lien Claims”);
and (C) all federal, state and local income taxes, sales taxes, excise taxes
and all other taxes and assessments of Borrower on its business, income or
assets; in each instance before any penalty or fine is incurred with respect
thereto.  Borrower’s obligation to pay
Basic Carrying Costs pursuant to this Agreement shall include, to the extent
permitted by applicable law, Impositions resulting from future changes in law
which impose upon Lender an obligation to pay any property taxes on the
Mortgaged Property or other Impositions.


 


(ii) Borrower shall not be required to pay, discharge
or remove any Imposition or Lien Claim so long as Borrower contests in good
faith such Imposition or Lien Claim or the validity, applicability or amount
thereof by an appropriate legal proceeding which operates to prevent the
collection of such amounts and the sale of the applicable Mortgaged Property or
any portion thereof, so long as:


 


(A) the Indebtedness shall not have
been accelerated, if an Event of Default shall have occurred and be continuing;


 


(B) prior to the date on which such
Imposition or Lien Claim would otherwise have become delinquent, Borrower shall
have given Lender prior written notice of its intent to contest said Imposition
or Lien Claim and deposited with Lender (or with a court of competent
jurisdiction or other appropriate body approved by Lender) such additional
amounts as are necessary to keep on deposit at all times, an amount equal to at
least one hundred twenty five percent (125%) (or such higher amount as may be
required by applicable law) of the total of (x) the balance of such Imposition
or Lien Claim then remaining unpaid, and (y) all interest, penalties, costs and
charges accrued or accumulated thereon, together with such other security as
may be required in the proceeding, or as may be required by Lender, to insure
the payment of any such Imposition or Lien Claim and all interest and penalties
thereon; provided, that notwithstanding the foregoing, with respect to
Impositions or Lien Claims in an amount not in excess of $100,000, Borrower
shall not be required to deposit such amounts with the Lender, so long as
Borrower demonstrates to the reasonable satisfaction of the Lender that
Borrower has otherwise reserved such funds or such funds are otherwise
available to the Borrower;


 


(C) no risk of sale, forfeiture or
loss of any interest in the Mortgaged Property or any part thereof arises, in
Lender’s judgment, during the pendency of such contest;


 


(D) such contest does not, in
Lender’s determination, have a Material Adverse Effect;


 


(E) such contest is based on bona fide,
material, and reasonable claims or defenses;


 


(F) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any other
instrument to which Borrower is subject and shall not constitute a default
thereunder and such proceeding shall be conducted in accordance with all
applicable statutes, laws and ordinances; and


 


(G) Borrower shall have obtained such
endorsements to the Title Insurance Policy with respect to such Imposition or
Lien Claim as Lender may require (or escrowed


 


59

















 


with a
title insurance company funds sufficient to obtain such endorsements pursuant
to escrow arrangements reasonably satisfactory to Lender).


 


Any such contest shall be prosecuted
with due diligence, and Borrower shall promptly pay the amount of such
Imposition or Lien Claim as finally determined, together with all interest and
penalties payable in connection therewith. 
Lender shall have full power and authority, but no obligation, to apply
any amount deposited with Lender under this subsection to the payment of
any unpaid Imposition or Lien Claim to prevent the sale or forfeiture of the
Mortgaged Property for non-payment thereof, if Lender reasonably believes that
such sale or forfeiture is threatened. 
Any surplus retained by Lender after payment of the Imposition or Lien
Claim for which a deposit was made shall be promptly repaid to Borrower unless
an Event of Default shall have occurred, in which case said surplus may be
retained by Lender to be applied as Lender, in its sole and absolute
discretion, may elect.


 


(c)           Litigation.  Borrower shall give prompt written notice to
Lender of any material litigation or governmental proceedings pending or
threatened (in writing) against Borrower, or the Mortgaged Property, other than
personal injury litigation which is covered by insurance, eviction matters with
respect to tenants or occupants (in which no counterclaims for material damages
or liabilities are made against Borrower), and matters related to enforcement
of building or zoning codes (as long as the Mortgaged Property is in material
compliance with such building and zoning codes).


 


(d)           Environmental
Remediation.


 


(i) If any investigation, site monitoring, cleanup,
removal, restoration or other remedial work of any kind or nature is required
pursuant to an order or directive of any Governmental Authority or under any
applicable Environmental Law, because of or in connection with the current or
future presence, suspected presence, Release or suspected Release of a
Hazardous Substance on, under or from any Mortgaged Property or any portion
thereof (collectively, the “Remedial Work”), Borrower shall promptly
commence and diligently prosecute to completion all such Remedial Work, and
shall conduct such Remedial Work in accordance with the National Contingency
Plan promulgated under the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. § 9601 et seq. (“CERCLA”), if applicable,
and in accordance with other applicable Environmental Laws.  In all events, such Remedial Work shall be
commenced within such period of time as required under any applicable
Environmental Law.  If any fungus, mold,
mildew or other biological agent is present at any Mortgaged Property in a
manner or at a level that is reasonably likely to materially adversely affect
the value or utility of such Mortgaged Property or that poses a significant
health risk, the Borrower shall promptly commence and diligently prosecute to completion
the remediation of such condition to the reasonable satisfaction of the Lender
or its servicer.


 


(ii) If requested by Lender, all Remedial Work under clause
(i) above shall be performed by contractors, and, if the work is reasonably
anticipated to cost in excess of $75,000, under the supervision of a consulting
Engineer, each approved in advance by Lender which approval shall not be
unreasonably withheld or delayed. 
Borrower shall pay all costs and expenses reasonably incurred in
connection with such Remedial Work.  If
Borrower does not timely commence and diligently prosecute to completion the
Remedial Work, Lender may (but shall not be obligated to), upon 10 days prior
written notice to Borrower of its intention to do so, cause such Remedial Work to
be performed.  Borrower shall pay or
reimburse Lender on demand for all expenses (including reasonable attorneys’
fees and disbursements, but excluding internal overhead, administrative and
similar costs of Lender) reasonably relating to or incurred by Lender in


 


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connection with monitoring, reviewing
or performing any Remedial Work in accordance herewith.


 


(iii) Borrower shall not commence any Remedial Work
under clause (i) above, nor enter into any settlement agreement, consent
decree or other compromise relating to any Hazardous Substances or
Environmental Laws without providing notice to Lender as provided in Section 5.1(f).  Notwithstanding the foregoing, if the
presence or threatened presence of Hazardous Substances on, under, about or
emanating from the Mortgaged Property poses an immediate threat to the health,
safety or welfare of any Person or the environment, or is of such a nature that
an immediate response is necessary or required under applicable Environmental
Law, Borrower may complete all necessary Remedial Work.  In such events, Borrower shall notify Lender
as soon as practicable and, in any event, within three (3) Business Days, of
any action taken.


 


(iv) In the event the Environmental Report recommends
the development of an operation and maintenance program for any recognized
environmental condition at a Mortgaged Property (including, without limitation,
underground storage tanks asbestos and asbestos containing materials,
lead-based paints and lead in water supplies) (“O & M Program”),
Borrower shall develop an O & M Program, as approved by Lender, in Lender’s
sole discretion, and shall, during the term of the Loan, including any
extension or renewal thereof, comply in all respects with the terms and
conditions of the O & M Program.


 


(e)           Environmental
Matters: Inspection.


 


(i) Borrower shall not knowingly permit any Hazardous
Substances to be present on or under or to emanate from the Mortgaged Property,
or migrate from adjoining property onto or into the Mortgaged Property, except
under conditions permitted by applicable Environmental Laws and, in the event
that such Hazardous Substances are present on, under or emanate from the
Mortgaged Property, or migrate onto or into the Mortgaged Property, Borrower
shall cause the removal or remediation of such Hazardous Substances, in
accordance with this Agreement and as required by Environmental Laws
(including, where applicable, the National Contingency Plan promulgated
pursuant to the CERCLA), either on its own behalf or by causing a tenant or
other party legally responsible therefor to perform such removal and
remediation.  Borrower shall use
commercially reasonable efforts to prevent, and to seek the remediation of, any
migration of Hazardous Substances onto or into the Mortgaged Property from any
adjoining property.


 


(ii) Upon reasonable prior written notice, Lender
shall have the right, except as otherwise provided under Leases, at all
reasonable times during normal business hours to enter upon and inspect
environmental conditions with respect to all or any portion of any Mortgaged
Property, provided that such inspections shall not unreasonably
interfere with the operation or the tenants, residents or occupants of any
Mortgaged Property.  If Lender has
reasonable grounds to suspect that Remedial Work may be required, Lender shall
notify Borrower and, thereafter, may select a consulting Engineer to conduct
and prepare reports of such inspections (with notice to Borrower prior to the
commencement of such inspection). 
Borrower shall be given a reasonable opportunity to review any reports,
data and other documents or materials reviewed or prepared by the Engineer, and
to submit comments and suggested revisions or rebuttals to same.  The inspection rights granted to Lender in
this Section 5.1(e) shall be in addition to, and not in limitation
of, any other inspection rights granted to Lender in this Agreement, and shall
expressly include the right (if Lender reasonably suspects that Remedial Work
may be required) to conduct soil borings, establish ground water monitoring
wells and conduct other customary environmental tests, assessments and audits.


 


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(iii) Borrower agrees to bear and shall pay or reimburse
Lender on demand for all sums advanced and reasonable expenses incurred
(including reasonable attorneys’ fees and disbursements, but excluding internal
overhead, administrative and similar costs of Lender) reasonably relating to,
or incurred by Lender in connection with, the inspections and reports described
in this Section 5.1(e)  (to the extent such inspections and reports relate to
any Mortgaged Property) in the following situations:


 


(x)            If Lender has
reasonable grounds to believe, at the time any such inspection is ordered, that
there exists an occurrence or condition that could lead to a material
Environmental Claim with respect to such Mortgaged Property;


 


(y)           If any such
inspection reveals an occurrence or condition that is reasonably likely to lead
to a material Environmental Claim with respect to such Mortgaged Property; or


 


(z)            If an Event of
Default with respect to such Mortgaged Property exists at the time any such
inspection is ordered, and such Event of Default relates to any representation,
covenant or other obligation pertaining to Hazardous Substances, Environmental
Laws or any other environmental matter.


 


(f)            Environmental
Notices.  Borrower shall promptly
provide notice to Lender of:


 


(i) a material Environmental Claim asserted by any Governmental
Authority with respect to any Hazardous Substance on, in, under or emanating
from any Mortgaged Property;


 


(ii) any proceeding, investigation or inquiry
commenced or threatened in writing by any Governmental Authority, against
Borrower, any Affiliate of Borrower or with respect to any Mortgaged Property
concerning the presence, suspected presence, Release or threatened Release of
Hazardous Substances from or onto, in or under any property not owned by
Borrower (including, without limitation, proceedings under the CERCLA;


 


(iii) a material Environmental Claims asserted or
threatened against Borrower, against any other party occupying any Mortgaged
Property or any portion thereof which become known to Borrower or against any
Mortgaged Property;


 


(iv) the discovery by Borrower of a material
occurrence or condition giving rise to an obligation of the Borrower to the
Lender hereunder on any Mortgaged Property or on any real property adjoining or
in the vicinity of any Mortgaged Property;


 


(v) the commencement or completion of any Remedial
Work; and


 


(vi) any of the foregoing clauses (i) – (v) as to
which a tenant notifies Borrower under a Lease with respect to such tenant.


 


(g)           Copies
of Notices.  Borrower shall transmit
to Lender copies of any citations, orders, notices or other written
communications received from any Person and any notices, reports or other
written communications submitted to any Governmental Authority with respect to
the matters described in Section 5.1(f).


 


(h)           Environmental
Claims.  Lender may join and
participate in, as a party if Lender so determines, any legal or administrative
proceeding or action concerning the Mortgaged Property or any


 


62

















 


portion
thereof under any Environmental Law, if, in Lender’s reasonable judgment, the
interests of Lender shall not be adequately protected by Borrower; provided,
however, that Lender shall not participate in day-to-day decision making
with respect to environmental compliance. 
Borrower shall pay or reimburse Lender on demand for all reasonable sums
advanced and reasonable expenses incurred (including reasonable attorneys’ fees
and disbursements, but excluding internal overhead, administrative and similar
costs of Lender) by Lender in connection with any such action or proceeding.


 


(i)            Environmental
Indemnification.  Borrower shall
indemnify, reimburse, defend, and hold harmless Lender, and each of its
respective parents, subsidiaries, Affiliates, shareholders, directors,
officers, employees, representatives, agents, successors, assigns and attorneys
(collectively, the “Indemnified Parties”) for, from, and against all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses (including, without limitation, interest,
penalties, reasonable attorneys’ fees, disbursements and expenses, and
reasonable consultants’ fees, disbursements and expenses (but excluding
internal overhead, administrative, lost opportunity and similar costs of
Lender)), asserted against, resulting to, imposed on, or incurred by any
Indemnified Party, directly or indirectly, in connection with any of the
following (except to the extent same are directly and solely caused by the
gross negligence or willful misconduct of any Indemnified Party):


 


(i) events, circumstances, or conditions which form
the reasonable basis for an Environmental Claim;


 


(ii) any pollution or threat to human health or the
environment that is related in any way to Borrower’s or any previous owner’s or
operator’s management, use, control, ownership or operation of any Mortgaged
Property (including, without limitation, all on-site and off-site activities
involving Hazardous Substances), and whether occurring, existing or arising
prior to or from and after the date hereof, and whether or not the pollution or
threat to human health or the environment is described in the Environmental
Reports;


 


(iii) any Environmental Claim against any Person whose
liability for such Environmental Claim Borrower has or may have assumed or
retained either contractually or by operation of law; or


 


(iv) the breach of any representation, warranty or
covenant set forth in Section 4.2(e) and Sections 5.1(d)
through 5.1(i), inclusive.


 


The provisions of and undertakings and indemnification
set forth in this Section 5.1(i) shall survive the satisfaction and
payment of the Indebtedness and termination of this Agreement.


 


(j)            General
Indemnity.


 


(i) Borrower shall, at its sole cost and expense,
protect, defend, indemnify, release and hold harmless the Indemnified Parties
for, from and against any and all claims, suits, liabilities (including,
without limitation, strict liabilities), administrative and judicial actions
and proceedings, obligations, debts, damages, losses, costs, expenses, fines,
penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement, and litigation costs, of whatever kind or nature and whether or not
incurred in connection with any judicial or administrative proceedings
(including, but not limited to, reasonable attorneys’ fees and other reasonable
costs of defense) (the “Losses”) imposed upon or incurred by or asserted
against any Indemnified Parties (except as to any Indemnified Party to the
extent same are directly and solely caused by the gross negligence or willful
misconduct of such Indemnified Party) and directly or indirectly arising out of
or in any way relating to any one or more of the following:


 


63

















 


(A)          ownership of the Note or any of the
other Loan Documents or otherwise related to the Mortgaged Property or any
interest therein or receipt of any Rents or Accounts;


 


(B)           any untrue statement of any material
fact contained in any information concerning Borrower, the Mortgaged Property
or the Loan or the omission to state therein a material fact required to be
stated in such information or necessary in order to make the statements in such
information or in light of the circumstances under which they were made not
misleading;


 


(C)           any and all lawful action that may be
taken and is taken by the Lender in connection with the enforcement of the
provisions of this Agreement, the Note or any of the other Loan Documents,
whether or not suit is filed in connection with same, or in connection with
Borrower or any Affiliate of Borrower becoming a party to a voluntary or
involuntary federal or state bankruptcy, insolvency or similar proceeding;


 


(D)          any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about any
Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways;


 


(E)           any use, nonuse or condition in, on
or about the Mortgaged Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;


 


(F)           any failure on the part of Borrower
to perform or be in compliance with any of the terms of this Agreement or any
of the other Loan Documents;


 


(G)           performance of any labor or services
or the furnishing of any materials or other property in respect of the
Mortgaged Property or any part thereof pursuant to provisions of this
Agreement;


 


(H)          the failure of Borrower to file timely
with the Internal Revenue Service an accurate Form 1099-B, Statement for
Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with this Agreement;


 


(I)            any failure of the Mortgaged
Property to be in compliance with any Legal Requirement;


 


(J)            the enforcement by any Indemnified
Party of the provisions of this Section 5.1(j); and


 


(K)          any and all claims and demands
whatsoever which may be asserted against Lender by reason of any alleged
obligations or undertakings on its part to perform or discharge any of the
terms, covenants, or agreements contained in any Lease.


 


Any amounts payable to an
Indemnified Party by reason of the application of this Section 5.1(j)(i)
shall become due and payable ten (10) days after written demand and shall bear
interest at the Default Rate from the tenth (10th) day after demand until paid.


 


64

















 


(ii) Borrower shall, at its sole cost and expense,
protect, defend, indemnify, release and hold harmless the Indemnified Parties
from and against any and all Losses imposed upon or incurred by or asserted
against any of the Indemnified Parties and directly or indirectly arising out
of or in any way relating to any tax on the making and/or recording of this
Agreement, the Note or any of the other Loan Documents.


 


(iii) Borrower shall, at its sole cost and expense,
protect, defend, indemnify, release and hold harmless the Indemnified Parties
from and against any and all Losses (including, without limitation, reasonable
attorneys’ fees and costs) that the Indemnified Parties may incur, directly or
indirectly, as a result of a default under Borrower’s covenants with respect to
ERISA and employee benefits plans contained herein, including, without
limitation, any costs or expenses incurred in the investigation, defense, and
settlement of Losses incurred in correcting any prohibited transaction or in
the sale of a prohibited loan, and in obtaining any individual prohibited
transaction exemption under ERISA that may be required, in the Lender’s reasonable
discretion).


 


(iv) Promptly after receipt by an Indemnified Party
under this Section 5.1(j) of notice of the making of any claim or
the commencement of any action, such Indemnified Party shall, if a claim in
respect thereof is to be made by such Indemnified Party against Borrower under
this Section 5.1(j),  notify Borrower in writing, but the omission so to
notify Borrower will not relieve Borrower from any liability which it may have
to any Indemnified Party under this Section 5.1(j) or
otherwise.  In case any such claim is
made or action is brought against any Indemnified Party and such Indemnified
Party seeks or intends to seek indemnity from Borrower, Borrower will be
entitled to participate in, and, to the extent that it may wish, to assume the
defense thereof with counsel reasonably satisfactory to the Indemnified Party;
and, upon receipt of notice from Borrower to such Indemnified Party of its
election so to assume the defense of such claim or action and only upon
approval by the Indemnified Party of such counsel (such approval not to be
unreasonably withheld or delayed), Borrower will not be liable to such
Indemnified Party under this Section 5.1(j)  for any legal or other expenses subsequently
incurred by such Indemnified Party in connection with the defense thereof.  Notwithstanding the preceding sentence, each
Indemnified Party will be entitled to employ counsel separate from such counsel
for Borrower and from any other party in such action if such Indemnified Party
reasonably determines that a conflict of interest exists which makes
representation by counsel chosen by Borrower not advisable.  In such event, Borrower shall pay the
reasonable fees and disbursements of such separate counsel.  Borrower shall not, without the prior
written consent of an Indemnified Party, which consent shall not be
unreasonably withheld or delayed, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit
or proceeding in respect of which indemnification may be sought hereunder
(whether or not such Indemnified Party is an actual or potential party to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Party from all liability arising out of
such claim, action, suit or proceeding. 
Each Indemnified Party shall not enter into a settlement of or consent
to the entry of any judgment with respect to any action, claim, suit or
proceeding as to which an Indemnified Party would be entitled to indemnification
hereunder without the prior written consent of Borrower, which consent shall
not be unreasonably withheld or delayed.


 


The provisions of and undertakings and indemnification
set forth in this Section 5.1(j)  shall survive the
satisfaction and payment of the Indebtedness and termination of this Agreement.


 


(k)           Access
to Mortgaged Property.  Borrower
shall permit agents, representatives and employees of Lender to inspect each
Mortgaged Property or any part thereof at such reasonable times


 


65

















 


as may
be requested by Lender upon reasonable advance written notice (except during an
Event of Default), subject, however, to the rights of Borrower and of the
tenants of the Mortgaged Property.


 


(l)            Notice
of Default.  Borrower shall promptly
advise Lender in writing of any change in Borrower’s condition, financial or
otherwise, that is reasonably likely to have a Material Adverse Effect, or of
the occurrence of any Default or Event of Default.


 


(m)          Cooperate
in Legal Proceedings.  Except with
respect to any claim by Borrower, the General Partner, the Member or the
Guarantor against Lender, Borrower shall reasonably cooperate with Lender with
respect to any proceedings before any Governmental Authority that are reasonably
likely to in any way materially affect the rights of Lender hereunder or any
rights obtained by Lender under any of the Loan Documents and, in connection
therewith, shall not prohibit Lender, at its election, from participating in
any such proceedings.


 


(n)           Perform
Loan Documents.  Borrower shall
observe, perform and satisfy all the terms, provisions, covenants and
conditions required to be observed, performed or satisfied by it, and shall pay
when due all costs, fees and expenses required to be paid by it, under the Loan
Documents.


 


(o)           Insurance
Benefits.  Borrower shall reasonably
cooperate with Lender in obtaining for Lender the benefits of any Insurance
Proceeds lawfully or equitably payable to Borrower or Lender in connection with
any Mortgaged Property.  Lender shall be
reimbursed for any expenses reasonably incurred in connection therewith
(including reasonable attorneys’ fees and disbursements, but excluding internal
overhead, administrative and similar costs of Lender) out of such Insurance
Proceeds, all as more specifically provided in this Agreement.


 


(p)           Further
Assurances.  Borrower shall, at
Borrower’s sole cost and expense:


 


(i) upon Lender’s reasonable request therefor given
from time to time, pay for (a) reports of UCC, tax lien, judgment and
litigation searches with respect to Borrower, and (b) searches of title to
the Mortgaged Property, each such search to be conducted by search firms
designated by Lender in each of the locations designated by Lender;


 


(ii) furnish to Lender all instruments, documents,
certificates, title and other insurance reports and agreements, and each and
every other document, certificate, agreement and instrument required to be
furnished pursuant to the terms of the Loan Documents;


 


(iii) execute and deliver to Lender such documents,
instruments, certificates, assignments and other writings, and do such other
acts necessary, to evidence, preserve and/or protect the Collateral at any time
securing or intended to secure the Note, as Lender may reasonably require
(including, without limitation, tenant estoppel certificates, an amended or
replacement Mortgages, UCC financing statements or Collateral Security
Instruments); and


 


(iv) do and execute all and such further lawful and
reasonable acts, conveyances and assurances for the better and more effective
carrying out of the intents and purposes of this Agreement and the other Loan
Documents, as Lender shall reasonably require from time to time.


 


(q)           Management
of Mortgaged Property.


 


(i) Each Mortgaged Property shall be managed at all
times by the current Manager or another manager reasonably satisfactory to
Lender, pursuant to a Management Agreement. 
Any such Manager may be an Affiliate of Borrower, provided that:  (a) the terms and conditions of


 


66

















 


such Manager’s engagement are at
arm’s length, reasonable, competitive and customary in the applicable
marketplace; and (b) Lender has approved such Manager and such terms, which
approval shall not be unreasonably withheld or delayed.  The Management Agreement, dated as of the
date hereof, between the Borrower and the Manager is deemed approved by Lender
in all respects.  Borrower shall cause
the Manager of the Mortgaged Property to agree that such Manager’s Management Agreement
is subject and subordinate in all respects to the Indebtedness and to the Lien
of the Mortgages.  A Management
Agreement may be terminated or assigned (1) by Borrower at any time in
accordance with the provisions of such Management Agreement so long as a
successor or assignee Manager as specified below shall have been appointed and
approved and such successor Manager has (i) entered into (or assumed) a
Management Agreement in form and substance approved by Lender, which approval
shall not be unreasonably denied, conditioned or delayed, and (ii) has executed
and delivered a Manager’s Subordination to Lender, and (2) by Lender upon
thirty (30) days’ prior written notice to Borrower and the Manager (a) upon the
occurrence and continuation of an Event of Default or (b) if the Manager
commits any act which would permit termination under the Management Agreement
(subject to any applicable notice, grace and cure periods provided in the
Management Agreement) or (c) if a change of majority control occurs with
respect to the Manager.  Notwithstanding
the foregoing, any successor manager selected hereunder by Lender or Borrower
to manage the Mortgaged Property shall be a reputable management company having
substantial experience in the management of real property of a similar type,
size and quality in the state in which the Mortgaged Property is located.  Borrower may from time to time appoint a
successor manager to manage the Mortgaged Property with Lender’s prior written
consent, such consent not to be unreasonably withheld.  Borrower acknowledges and agrees that any
consent or approval requested of Lender under this Section  may be
conditioned by Lender, at Lender’s discretion, upon Borrower first obtaining a
Rating Confirmation with respect to such change in management, and Lender shall
not be deemed to be acting unreasonably in requiring such a Rating
Confirmation.  Borrower further
covenants and agrees that any manager of Mortgaged Property shall at all times
while any Indebtedness is outstanding maintain worker’s compensation insurance
as required by Governmental Authorities.


 


(ii) Borrower further covenants and agrees that each
Mortgaged Property shall be operated pursuant to the Management Agreement and
that Borrower shall:  (w) promptly
perform and/or observe all of the material covenants and agreements required to
be performed and observed by it under the Management Agreement and do all
things reasonably necessary to preserve and to keep unimpaired its material
rights thereunder; (x) promptly notify Lender of any material default under the
Management Agreement of which it is aware; (y) promptly deliver to Lender a
copy of each financial statement, business plan, capital expenditures plan,
notice and report received by it under the Management Agreement, including, but
not limited to, financial statements; and (z) promptly enforce the performance
and observance of the covenants and agreements required to be performed and/or
observed by the Manager under the Management Agreement.


 


(r)            Financial
Reporting.


 


(i) Borrower shall keep and maintain or shall cause to
be kept and maintained on a Fiscal Year basis in accordance with GAAP
consistently applied, books, records and accounts reflecting in reasonable
detail all of the financial affairs of Borrower and all items of income and
expense in connection with the operation of the Mortgaged Property and
ownership of the Mortgaged Property and in connection with any services,
equipment or furnishings provided in connection with the operation of the
Mortgaged Property, whether such income or expense may be realized by Borrower
or by any other Person whatsoever. 
Lender shall have the right from time to time at


 


67

















 


all
times during normal business hours upon reasonable prior written notice to
Borrower to examine such books, records and accounts at the office of Borrower
or other Person maintaining such books, records and accounts and to make such
copies or extracts thereof as Lender shall desire.  During the continuation of an Event of Default (including,
without limitation, an Event of Default resulting from the failure of Borrower
to deliver any of the financial information required to be delivered pursuant
to this Section 5.1(r)), Borrower shall pay any reasonable costs and
expenses incurred by Lender to examine Borrower’s accounting records, as Lender
shall reasonably determine to be necessary or appropriate in the protection of
Lender’s interest.


 


(ii) Borrower shall furnish to Lender annually, within
ninety (90) days following the end of each Fiscal Year, a complete copy of
Borrower’s and Guarantor’s financial statements, each audited by a “Big Four”
accounting firm or such other Independent certified public accountant
acceptable to Lender in accordance with GAAP consistently applied covering
Borrower’s and Guarantor’s respective financial position and results of
operations, for such Fiscal Year and containing a statement of revenues and
expenses, a statement of assets and liabilities and a statement of Borrower’s
or Guarantor’s (as applicable) equity, all of which shall be in form and
substance reasonably acceptable to Lender. 
Any audit requirements of the Borrower pursuant to this Agreement may be
satisfied by delivery of the audited consolidated financial statements of the
Guarantor, provided that such financial statements of the Guarantor contain (i)
a separate income and expense statement for the Borrower and (ii) a separate
balance sheet, including a statement of Borrower’s equity.  Lender shall have the right from time to
time to review and consult with respect to the auditing procedures used in the
preparation of such annual financial statements.  Together with Borrower’s and Guarantors’ annual financial
statements, Borrower shall furnish, and cause Guarantor to furnish, to Lender
an Officer’s Certificate certifying as of the date thereof (x) that the annual
financial statements present fairly in all material respects the results of
operations and financial condition of Borrower or Guarantor, as applicable, all
in accordance with GAAP consistently applied, and (y) whether there exists an
Event of Default or Default, and if such Event of Default or Default exists,
the nature thereof, the period of time it has existed and the action then being
taken to remedy same.


 


(iii) Borrower shall furnish to Lender, within
forty-five (45) days following the end of each Fiscal Year quarter true,
complete and correct quarterly unaudited financial statements (including
statements of cash flow) prepared in accordance with GAAP with respect to
Borrower and Guarantor for the portion of the Fiscal Year then ended.


 


(iv) No later than thirty (30) days following the end
of each of the months of December, March, June, and September, beginning with
the month ending at March 31, 2004, Borrower shall prepare and deliver to
Lender and its servicer a statement (each a “Quarterly Statement”) in
substantially the form of Schedule 8 hereto, setting forth with respect
to the Mortgaged Property,


 


(A)          a rent roll dated as of the last day
of such quarter identifying the name of each tenant and the associated
Homesite, security deposit, amount due at the beginning of the month, charges
in the current month (including Homesite rent, water/sewer, gas/electric,
trash, mobile home rent, notes amount and other charges), payments made during
the month, amount due at the end of the month, total Homesites at the Mortgaged
Property and total occupied Homesites at the Mortgaged Property, with the
occupancy level expressed as a percentage;


 


(B)           quarterly and year-to-date operating
statements, each of which shall include an itemization of budgeted and actual
(not pro forma) capital expenditures during


 


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the applicable period, and which
shall be prepared for each individual Mortgaged Property and, on a consolidated
basis, for all the Mortgaged Property; and


 


(C)           a quarterly and year-to-date
comparison of the budgeted income and expenses with the actual income and
expenses for such quarter and year to date, together with if requested by
Lender, a detailed explanation of any variances between budgeted and actual
amounts that are in excess of five percent (5%) for each line item therein.


 


(v) Within thirty (30) days after the end of each
calendar month (and as to rent rolls requested by Lender on an interim basis,
within thirty (30) days after Lender’s request therefor), Borrower shall
provide to Lender and its servicer a statement (each a “Monthly Statement”)
in substantially the form of Schedule 9 hereto, setting forth with respect
to the Mortgaged Property


 


(A) 
a certified rent roll, for each individual Mortgaged Property containing
the information referred to in Section 5.1(r)(iv)(A),


 


(B) 
a certification of all prepaid Rent that has been collected for each
individual Mortgaged Property more than one (1) month in advance of its due
date,


 


(C) 
monthly operating financial statements for the last twelve (12) months,
including a comparison on a year-to-date basis to budget and prior year, for
each individual Mortgaged Property and, on a consolidated basis, for Borrower,
and


 


(D) 
a monthly occupancy report which includes data quantifying the total
number of Homesites, beginning occupancy, monthly move-in and move-out data for
residents, rentals and change of occupancy, ending monthly occupancy, ending
monthly occupancy percentage, budgeted occupancy percentage, total rentals,
rentals as a percentage of Homesites, total occupied rentals, rental occupancy
percentage, total repossessions and repossessions as a percentage of total Homesites.


 


(vi) Borrower shall furnish to Lender, within fifteen
(15) Business Days after request, such further information with respect to the
operation of the Mortgaged Property and the financial affairs of Borrower as
may be reasonably requested by Lender, including all business plans prepared
for Borrower.


 


(vii) Borrower shall furnish to Lender, within fifteen
(15) Business Days after request, such further information regarding any Plan
or Multiemployer Plan and any reports or other information required to be filed
under ERISA as may be reasonably requested by Lender in writing.


 


(viii) At least thirty (30) days prior to the end of
each of Borrower’s Fiscal Years, Borrower shall submit or cause to be submitted
to Lender for its approval, such approval not to be unreasonably withheld or
delayed, an Operating Budget for Property Expenses, Capital Improvement Costs,
Leasing Commissions, and replacement reserve costs for the next Fiscal Year for
the Mortgaged Property.  Such Operating
Budget may allow for a ten percent (10%) line item variance.  Until so approved by Lender for the
subsequent Fiscal Year in accordance with the procedure set forth in Section 5.1(r)(ix)
below, the Operating Budget approved by Lender for the preceding Fiscal Year
shall remain in effect for purposes of Section 2.12; provided,
that for so long as such prior Operating Budget remains in effect, amounts set
forth in the prior Operating Budget with respect to Property Expenses shall be
deemed


 


69

















 


increased with respect to actual
increases in Basic Carrying Costs and non-discretionary utility expenditures
and shall be deemed increased by three percent (3%) with regard to
discretionary items.  Promptly following
the occurrence and during the continuance of an Event of Default, the Borrower
shall submit or cause to be submitted to Lender a Working Capital Budget for
the remainder of the Fiscal Year during which such Event of Default occurs and
by not later than the end of each of Borrower’s Fiscal Years with respect to
the subsequent Fiscal Year.


 


(ix) Borrower shall submit any proposed Operating
Budget in writing sent by recognized overnight delivery service or by
registered or certified mail (and simultaneously shall contact the Lender by telephone
and by electronic mail) in accordance with the terms of this Agreement (the “First
Notice”), requesting Lender’s approval of such Operating Budget.  Lender shall use reasonable efforts to
deliver to Borrower its written approval or disapproval of the proposed
Operating Budget within ten (10) Business Days after Lender shall have received
the First Notice.  Unless Lender shall
have approved the Operating Budget contained in the First Notice, Lender’s
approval shall be deemed to be withheld. 
If Borrower does not receive Lender’s response at the end of such ten
(10) Business Days period, Borrower may resubmit its written request to Lender
(the “Second Notice”).  The Second
Notice shall make reference to the First Notice and shall bear the following
legend in capital letters:


 


“LENDER’S
FAILURE TO RESPOND TO THIS REQUEST FOR APPROVAL WITHIN TEN (10) BUSINESS DAYS
FOLLOWING RECEIPT SHALL BE DEEMED TO CONSTITUTE LENDER’S CONSENT TO THE
OPERATING BUDGET DESCRIBED HEREIN.”


 


If Lender does not
approve or disapprove the proposed Operating Budget within ten (10) Business
Days after Lender shall have received Borrower’s Second Notice, Lender shall be
deemed to have approved the proposed Operating Budget.


 


(x) Together with the financial statements, rent
rolls, operating statements and other documents and information provided to
Lender by or on behalf of Borrower under this Section, Borrower also shall
deliver to Lender a certification in form and substance reasonably satisfactory
to Lender, executed on behalf of Borrower by its chief executive officer or
chief financial officer (or by the individual Guarantor if the Guarantor is an
individual) stating that, to such officer’s or individual’s knowledge, such
financial statements, rent rolls, operating statements and other documents and
information are true and complete in all material respects.


 


(xi)           For
purposes of this Section 5.1(r), all of the financial reporting
requirements may be satisfied by the Borrower posting the required deliveries
on a secure website reasonably satisfactory to the Lender and sending to the
Lender and its servicer each month an electronic mail communication notifying
the Lender and its servicer of the linkage to such website; provided
that notwithstanding the foregoing, in the event the Lender includes the Loan
in a Secondary Market Transaction in which Securities are issued or otherwise
changes the identity of its servicer to a Person other than the initial
servicer identified to the Borrower as of the Closing Date, then the Lender may
require that such deliveries be made to Lender and its servicer in hard copy
and on diskette or through electronic mail (including Microsoft Excel format),
in form and substance reasonably acceptable to Lender.


 


(s)           Operation
of Mortgaged Property.  Borrower shall
cause the operation of each Mortgaged Property to be conducted at all times in
a manner consistent with at least the level of operation of such Mortgaged
Property as of the Closing Date, including, without limitation, the following:


 


70

















 


(i) to maintain or cause to be maintained the standard
of each Mortgaged Property at all times at a level not lower than that
maintained by prudent managers of similar facilities or land in the region
where the Mortgaged Property is located;


 


(ii) to operate or cause to be operated each Mortgaged
Property in a prudent manner in compliance in all material respects with
applicable Legal Requirements and Insurance Requirements relating thereto and
maintain or cause to be maintained all material licenses, Permits and any other
agreements necessary for the continued use and operation of each Mortgaged
Property; and


 


(iii) to maintain or cause to be maintained sufficient
Inventory and Equipment of types and quantities at each Mortgaged Property to
enable Borrower to operate each Mortgaged Property and to comply in all
material respects with all Leases affecting each Mortgaged Property.


 


(t)            Material
Agreements.  Except for Leases and
any Management Agreement complying with the Loan Documents, Borrower shall not
enter into or become obligated under any material agreement pertaining to the
Mortgaged Property, including without limitation brokerage agreements, unless
the same may be terminated without cause and without payment of a penalty or
premium, on not more than thirty (30) days’ prior written notice.  Borrower will (A) comply with the
requirements of all present and future applicable laws, rules, regulations and
orders of any governmental authority in all jurisdictions in which it is now
doing business or may hereafter be doing business, (B) maintain all
material licenses and permits now held or hereafter acquired by Borrower, and
(C) perform, observe, comply and fulfill all of its obligations, covenants
and conditions contained in any material agreement pertaining to the Mortgaged
Property.


 


(u)           ERISA.  Borrower shall deliver to Lender as soon as
possible, and in any event within ten days after Borrower knows or has reason
to believe that any of the events or conditions specified below with respect to
any Plan or Multiemployer Plan has occurred or exists, an Officer’s Certificate
setting forth details respecting such event or condition and the action, if
any, that Borrower or its ERISA Affiliate proposes to take with respect thereto
(and a copy of any report or notice required to be filed with or given to PBGC
by Borrower or an ERISA Affiliate with respect to such event or condition):


 


(i) any reportable event, as defined in
Section 4043(b) of ERISA and the regulations issued thereunder, with
respect to a Plan, as to which PBGC has not by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within thirty
(30) days of the occurrence of such event (provided that a failure to meet the
minimum funding standard of Section 412 of the Code or Section 302 of
ERISA, including, without limitation, the failure to make on or before its due
date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the Code);
and any request for a waiver under Section 412(d) of the Code for any
Plan;


 


(ii) the distribution under Section 4041(c) of
ERISA of a notice of intent to terminate any Plan or any action taken by
Borrower or an ERISA Affiliate to terminate any Plan;


 


(iii) the institution by PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by Borrower or any ERISA
Affiliate of Borrower of a notice from a Multiemployer Plan that such action
has been taken by PBGC with respect to such Multiemployer Plan;


 


71

















 


(iv) the complete or partial withdrawal from a Multiemployer
Plan by Borrower or any ERISA Affiliate of Borrower that results in material
liability under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or the receipt
by Borrower or any ERISA Affiliate of Borrower of notice from a Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section 4241
or 4245 of ERISA or that it intends to terminate or has terminated under
Section 4041A of ERISA;


 


(v) the institution of a proceeding by a fiduciary of
any Multiemployer Plan against Borrower or any ERISA Affiliate of Borrower to
enforce Section 515 of ERISA, which proceeding is not dismissed within
thirty (30) days;


 


(vi) the adoption of an amendment to any Plan that, pursuant
to Section 401(a)(29) of the Code or Section 307 of ERISA, would
result in the loss of tax-exempt status of the trust of which such Plan is a
part if Borrower or an ERISA Affiliate of Borrower fails to timely provide
security to the Plan in accordance with the provisions of said Sections; and


 


(vii) the imposition of a lien or a security interest
in connection with a Plan.


 


(v)           Refinancing
Loan.  If Borrower or any other
Person in which Borrower or its members or partners have a direct or indirect beneficial
ownership interest proposes to obtain a first mortgage loan to be secured by
the Mortgaged Properties from any Person (other than the initial Lender) and to
cause the proceeds of such loan to be used to pay or prepay the Loan in whole
or in part (including, without limitation, on the Maturity Date or otherwise
pursuant to Section 2.6(a) or 2.7(a)) (any such transaction,
a “Refinancing Loan”), Borrower shall provide to the initial Lender in
writing the Proposed Terms (including by delivering to the initial Lender
actual copies of all current term sheets which have been obtained, except
Borrower may redact or withhold the name of the proposed lender on such
Refinancing Loan to the extent Borrower or such Person is subject to a
confidentiality agreement).  The initial
Lender shall have five (5) Business Days from its receipt in writing of such
proposal to offer to Borrower a Refinancing Loan on terms specified by the
initial Lender in writing (the “Lender’s Terms”).  If prior to the expiration of such five (5)
Business Day period, the initial Lender shall offer to Borrower or such
Affiliate a transaction with the same material terms as the Proposed Terms
provided to the initial Lender and the same material conditions precedent to
closing as those set forth in the Commitment, Borrower or such Affiliate shall
accept, and enter into, the transaction offered by the initial Lender and shall
not accept, or enter into, such Refinancing Loan.  If the initial Lender declines to offer a transaction on the same
terms as the Proposed Terms and Borrower or such Affiliate subsequently either
proposes to obtain a Refinancing Loan with material business terms at closing
economically less favorable to Borrower or such Affiliate than those previously
disclosed to Lender, then Borrower or such Affiliate shall provide the initial
Lender with a further opportunity to make the Refinancing Loan on the modified
terms in accordance with the timing provisions set forth above.


 


(w)          Secondary
Market Transaction.  Borrower
acknowledges that Lender and its successors and assigns may (i) sell the Loan
to one or more investors as a whole loan, (ii) participate the Loan to one or
more investors, (iii) deposit the Loan with a trust, which trust may sell
certificates to investors evidencing an ownership interest in the trust assets,
or (iv) otherwise sell the Loan or interests therein to investors (the
transactions referred to in clauses (i) through (iv) above are
hereinafter each referred to as a “Secondary Market Transaction”).  Borrower shall cooperate with Lender in
attempting to effect or effecting any such Secondary Market Transaction and
shall cooperate in attempting to implement or implementing all requirements
imposed by any Rating Agency involved in any Secondary Market Transaction, including
but not limited to,


 


72

















 


(i) providing Lender an estoppel certificate and such
information, legal opinions and documents (including updated non-consolidation
opinions) relating to Borrower, the Guarantor, the Member, the Mortgaged
Property and any tenants of the Mortgaged Property as Lender or the Rating
Agencies or other Interested Parties (as defined below), may reasonably request
in connection with such Secondary Market Transaction, including, without
limitation, updated financial information, appraisals, market studies,
environmental reviews (Phase I’s and, if appropriate, Phase II’s),
Mortgaged Property condition reports and other due diligence investigations
together with appropriate verification of such updated information and reports
through letters of auditors and consultants, as of the closing date of the
Secondary Market Transaction,


 


(ii) amending the Loan Documents and Organizational
Agreement of Borrower, updating and/or restating officer’s certificates, title
insurance and other closing items, and providing updated representations and
warranties in Loan Documents and such additional representations and warranties
as may be required by Lender or the Rating Agencies, provided such amendment or
update (1) shall not change any of the financial terms of the Loan or result in
a material increase in the Borrower’s obligations or a material decrease in the
Borrower’s rights and (2) with respect to any amendment of an Organizational
Agreement, must have been required by the Rating Agencies,


 


(iii) participating in bank, investors and Rating
Agencies’ meetings if requested by Lender,


 


(iv) upon Lender’s request, amending the Loan
Documents (and updating and/or restating officer’s certificates, title
insurance and other closing items in connection therewith) to divide the Loan
into a first and a second mortgage loan, or into a one or more loans secured by
mortgages and by ownership interests in Borrower in whatever proportion Lender
determines,  which separated loans may
have different interest rates and amortization schedules (but with aggregated
financial terms which are equivalent to that of the Loan prior to such
separation, including, so long as an Event of Default has not occurred and is
not continuing, a ratable allocation of prepayments among the Loan components)
and thereafter to engage in separate Secondary Market Transactions with respect
to all or any part of the indebtedness and loan documentation, and


 


(v) reviewing the offering documents relating to any
Secondary Market Transaction to ensure that all information concerning
Borrower, the Guarantor, the Mortgaged Property, and the Loan is correct, and
certifying to the accuracy thereof.


 


Lender shall be permitted to share all such information
with the investment banking firms, Rating Agencies, accounting firms, law firms
and other third-party advisory firms and trustees, purchasers, transferees,
assignees, trustees, servicers and actual or potential investors involved with
the Loan and the Loan Documents or the applicable Secondary Market Transaction
(collectively, “Interested Parties”). 
Lender and all of the aforesaid Interested Parties shall be entitled to
rely on the information supplied by, or on behalf of, Borrower.  Lender may publicize the existence of the
Loan in connection with its marketing for a Secondary Market Transaction or
otherwise as part of its business development. 
Borrower shall provide such reasonable access to the
Mortgaged Property and personnel of the Manager and of Borrower’s constituent
members and the business and operations of all of the foregoing as Lender or
other Interested Parties may request in connection with any such Secondary
Market Transaction.  Borrower
understands that any such information may be incorporated into any offering
circular, prospectus, prospectus supplement, private placement memorandum or
other offering documents for any Secondary Market Transaction.  Without limiting the foregoing, Borrower and
Guarantor shall provide in


 


73

















 


connection with each of (i) a preliminary and a
final private placement memorandum or (ii) a preliminary and final
prospectus or prospectus supplement, as applicable (the documents referred to
in the foregoing clauses (i) and (ii), collectively, the “Disclosure
Documents”), an agreement certifying that Borrower and Guarantor have
examined such Disclosure Documents specified by Lender and that each such
Disclosure Document, as it relates to Borrower, Guarantor, any Affiliates, the
Mortgaged Property and Manager, does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading (a “Disclosure Certificate”).  Borrower and Guarantor shall indemnify, defend, protect and hold
harmless Lender, its Affiliates, directors, employees, agents and each Person,
if any, who controls Lender or any such Affiliate within the meaning of
Section 15 of the Securities Act of 1933 or Section 20 of the
Securities Exchange Act of 1934, and any other placement agent or underwriter
with respect to any Securitization or Secondary Market Transaction from and
against any losses, claims, damages, liabilities, costs and expenses
(including, without limitation, reasonable attorneys’ fees and disbursements)
that arise out of or are based upon any untrue statement of any material fact
contained in any Disclosure Certificate or other information or documents
furnished by Borrower, Guarantor or their Affiliates or in any representation
or warranty of any Borrower contained herein or in the other Loan Documents or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated in such information or necessary
in order to make the statements in such information not materially
misleading.  In any Secondary Market
Transaction, Lender may transfer its obligations under this Loan Agreement and
under the other Loan Documents (or may transfer the portion thereof
corresponding to the transferred portion of the Indebtedness), and thereafter
Lender shall be relieved of any obligations hereunder and under the other Loan
Documents arising after the date of said transfer with respect to the
transferred interest.  Each transferee
investor shall become a “Lender” hereunder. 
The holders from time to time of the Loan and/or any other interest of
the “Lender” under this Loan Agreement and the other Loan Documents may from
time to time enter into one or more co-lender or similar agreements in their
discretion.  Borrower acknowledges and
agrees that such agreements, as the same may from time to time be amended,
modified or restated, may govern the exercise of the powers and discretionary authority
of the Lender hereunder and under the other Loan Documents, but Borrower shall
be entitled to rely upon any actions taken by Lender or the designated
servicer(s) or agent(s) for Lender, whether or not within the scope of its
power and authority under such other agreements.  Lender shall be responsible for the payment of (1) all
out-of-pocket expenses incurred by the Lender in connection with any Secondary
Market Transaction, (2) one-half of the initial $20,000 of the reasonable
out-of-pocket expenses incurred by the Borrower in connection with its
compliance with this Section 5.1(w) (i.e. up to $10,000) and (3)
all reasonable out-of-pocket expenses incurred by Borrower in connection with
its compliance with this Section 5.1(w) in excess of $40,000 (i.e.
Borrower shall be solely responsible for the payment of such reasonable
out-of-pocket expenses between $20,000 and $40,000).


 


(x)            Insurance.


 


(i) Borrower, at its sole cost and expense, shall keep
the Improvements and Equipment insured (including, but not limited to, any
period of renovation, alteration and/or construction) during the term of the
Loan with the coverage and in the amounts required under this Agreement for the
mutual benefit of Borrower and Lender against loss or damage by fire, lightning,
wind and such other perils as are customarily included in a standard “all-risk”
or “special cause of loss” form and against loss or damage by other risks and
hazards covered by a standard extended coverage insurance policy (including,
without limitation, fire, lightning, hail, hurricane, windstorm, tidal wave,
explosion, acts of terrorism certified under the Terrorism Risk Insurance Act
of 2002, riot and civil commotion, vandalism, malicious mischief, strike, water
damage, sprinkler leakage, collapse, burglary, theft, mold and microbial matter
coverage arising as a result of covered perils under the standard “all risk”
policy and such other coverages as may be reasonably required by Lender on the
special form (formerly known as an all risk form)).  Such


 


74

















 


insurance shall be in an amount (i)
equal to at least the greater of then full replacement cost of the Improvements
and Equipment (exclusive of the cost of foundations and footings), without
deduction for physical depreciation and the outstanding Principal Indebtedness,
and (ii) such that the insurer would not deem Borrower a co-insurer under said
policies.  The policies of insurance
carried in accordance with this Section 5.1(x) shall be paid not
less than ten (10) days in advance of the due date thereof and shall
contain the “Replacement Cost Endorsement” with a waiver of depreciation.  If terrorism coverage is excluded on an
“all-risk” basis, then Borrower shall obtain coverage for terrorism and similar
acts in the stand alone terrorism market. 
Notwithstanding the foregoing, the terrorism coverage may exclude
non-certified Terrorism Risk Insurance Act of 2002 coverage (i.e. the actions
of domestic actors).


 


(ii) Borrower, at its sole cost and expense, for the
mutual benefit of Borrower and Lender, shall also obtain and maintain or cause
to be obtained and maintained during the entire term of the Loan the following
policies of insurance:


 


(A)          flood insurance, if any part of the
Mortgaged Property is located in an area identified by the Federal Emergency
Management Agency as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance
Reform Act of 1994 (and any amendment or successor act thereto) in an amount at
least equal to the maximum limit of coverage available with respect to the
Improvements and Equipment under said Act;


 


(B)           Comprehensive General Liability
insurance, including a broad form comprehensive general liability endorsement
and coverage for broad form property damage, contractual damages, personal
injuries (including death resulting therefrom) and a liquor liability
endorsement if liquor is sold on the Mortgaged Property, containing minimum
limits of liability of $1 million for both injury to or death of a person and
for property damage per occurrence and $3 million in the aggregate for the
Mortgaged Property, and such other liability insurance reasonably requested by
Lender; in addition, at least $25 million excess and/or umbrella liability
insurance shall be obtained and maintained for any and all claims, including
all legal liability imposed upon Borrower and all court costs and attorneys’ fees
incurred in connection with the ownership, operation and maintenance of the
Mortgaged Property;


 


(C)           business interruption insurance
(including rental value) in an annual aggregate amount equal to the estimated
income from the Leases of each Mortgaged Property (including, without
limitation, the loss of all Rents and additional Rents payable by all of the
lessees under the Leases (whether or not such Leases are terminable in the
event of a fire or casualty)), such insurance to cover losses for a period of
twelve (12) months after the date of the fire or casualty in question, plus an
extended period of indemnity commencing at the time repairs are completed for a
period of not less than 30 days and to be increased or decreased, as
applicable, from time to time during the term of the Loan if, and when, the
gross revenues from the Leases of the Mortgaged Property materially increase or
decrease, as applicable (including, without limitation, increases from new
Leases and renewal Leases entered into in accordance with the terms of this
Agreement), to reflect all increased Rent and increased additional Rent payable
by all of the lessees under such renewal Leases and all Rent and additional
Rent payable by all of the lessees under such new Leases;


 


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(D)          all risk physical loss and damage
coverage with respect to heating and air conditioning equipment, located in,
on, or about the Improvements, except the coverage required under this clause
(ii)(D) shall not be required to be maintained as a separate policy and may be
included as part of the coverages provided under clause (i);


 


(E)           worker’s compensation insurance
coverage (in amounts not less than the statutory minimums for all persons
employed by Borrower or its tenants at the Mortgaged Property and in compliance
with all other requirements of applicable local, state and federal law) and
“Employers Liability” insurance in amounts not less than required by statute;


 


(F)           during any period of repair or
restoration, builder’s “all risk” insurance in an amount equal to not less than
the full insurable value of the Mortgaged Property against such risks
(including, without limitation, fire and extended coverage and collapse of the
Improvements to agreed limits) as Lender may request, in form and substance
acceptable to Lender;


 


(G)           if reasonably required by Lender with
respect to any zoning matter that is reasonably likely to materially adversely
affect the value of any Mortgaged Property, ordinance or law coverage to compensate
for the cost of demolition, increased cost of construction, and loss to any
undamaged portions of the Improvements, if the current use of the Mortgaged
Property or the Improvements themselves are or become “nonconforming” pursuant
to the applicable zoning regulations, unless full rebuildability following
casualty is otherwise permitted under such zoning regulations notwithstanding
such nonconformity;


 


(H)          if required by Lender as a result of
any Mortgaged Property being located in an area with a high degree of seismic
activity, earthquake damage insurance in an amount and form acceptable to
Lender;


 


(I)            such other insurance as may from
time to time be reasonably required by Lender in order to protect its interests
with respect to the Loan and the Mortgaged Property and to conform such
requirements to then current standards for a Secondary Market Transaction.


 


(iii) All policies of insurance (the “Policies”)
required pursuant to this Section 5.1(x):


 


(A) shall be issued by an insurer approved by Lender
which has a claims paying ability rating of not less than “AA” (or the
equivalent) by Rating Agencies satisfactory to Lender (one of which shall be
S&P) and A:XIII or better as to claims paying ability by AM Best, provided,
that notwithstanding the foregoing, (1) in the event American Modern Insurance
shall be the insurer providing the standard all-risk insurance policy, then
such insurer shall not be required to satisfy such claims paying ability rating
by the Rating Agencies, so long as the Borrower delivers to the Lender evidence
reasonably satisfactory to the Lender that the insurer has purchased
reinsurance with respect to not less than 70% of such policy from a reinsurer
with a claims paying ability rating by the Rating Agencies of not less than “A”
(or the equivalent) by Rating Agencies satisfactory to the Lender (one of which
shall be S&P) and shall only be required to maintain a claims paying
ability rating by AM Best of A:VIII or better and (2) the insurer providing the
worker’s compensation insurance coverage shall only be required to maintain a
claims


 


76

















 


paying ability rating of
not less than “A” (or the equivalent) by Rating Agencies satisfactory to the
Lender (one of which shall be S&P),


 


(B) shall name Lender as an additional insured and
contain a standard noncontributory mortgagee clause and a Lender’s Loss Payable
Endorsement, or their equivalents, naming Lender (and/or such other party as
may be designated by Lender) as the party to which all payments made by such
insurance company shall be paid,


 


(C) shall be maintained throughout the term of the
Loan without cost to Lender,


 


(D) shall contain such provisions as Lender deems
reasonably necessary or desirable to protect its interest (including, without
limitation, endorsements providing that neither Borrower, Lender nor any other
party shall be a co-insurer under said Policies and that Lender shall receive
at least thirty (30) days prior written notice of any modification, reduction
or cancellation),


 


(E) shall contain a waiver of subrogation against
Lender,


 


(F) shall be for a term of not less than one year,


 


(G) shall provide for claims to be made on an
occurrence basis,


 


(H) shall contain an agreed value clause updated
annually (if the amount of coverage under such policy is based upon the
replacement cost of the Mortgaged Property),


 


(I) shall designate Lender as “mortgagee and loss
payee” (except general public liability and excess liability, as to which
Lender shall be named as additional insured),


 


(J) shall be issued by an insurer licensed in the
state in which the Mortgaged Property is located,


 


(K) shall provide that Lender may, but shall not be
obligated to, make premium payments to prevent any cancellation, endorsement,
alteration or reissuance, and such payments shall be accepted by the insurer to
prevent same, and


 


(L) shall be reasonably satisfactory in form and
substance to Lender and reasonably approved by Lender as to amounts, form, risk
coverage, deductibles, loss payees and insureds to the extent not otherwise
specified in this Section 5.1(x). 
All property damage insurance policies (except for flood and earthquake
policies) must automatically reinstate after each loss.


 


Copies of said Policies, certified as true and correct
by Borrower, or insurance certificates thereof, shall be delivered to
Lender.  Not later than ten (10) days
prior to the expiration date of each of the Policies, Borrower shall deliver to
Lender satisfactory evidence of the renewal of each Policy.  The insurance coverage required under this Section 5.1(x)
may be effected under a blanket policy or policies covering the Mortgaged
Property and other property and assets not constituting a part of the
Collateral; provided that any such blanket policy shall provide at least
the same amount and form of protection as would a separate policy insuring the
Mortgaged Property individually, which amount shall not be less than the amount
required pursuant to this Section 5.1(x) and which shall in any
case comply in all other respects with the requirements of


 


77

















 


this Section 5.1(x).  Upon demand therefor, Borrower shall
reimburse Lender for all of Lender’s or its designee’s reasonable costs and
expenses incurred in obtaining any or all of the Policies or otherwise causing
the compliance with the terms and provisions of this Section 5.1(x),
including (without limitation) obtaining updated flood hazard certificates and
replacement of any so-called “forced placed” insurance coverages to the extent
Borrower was required to obtain and maintain any such Policy or Policies
hereunder and failed to do so.  Borrower
shall pay the premiums for such Policies (the “Insurance Premiums”) as
the same become due and payable and shall furnish to Lender evidence of the
renewal of each of the Policies with receipts for the payment of the Insurance
Premiums or other evidence of such payment reasonably satisfactory to Lender
(provided, however, that Borrower is not required to furnish such evidence of payment
to Lender in the event that such Insurance Premiums have been paid by
Lender).  If Borrower does not furnish
such evidence and receipts at least ten (10) days prior to the expiration
of any expiring Policy, then Lender may procure, but shall not be obligated to
procure, such insurance and pay the Insurance Premiums therefor, and Borrower
agrees to reimburse Lender for the cost of such Insurance Premiums promptly on
demand.  Within thirty (30) days
after request by Lender, Borrower shall obtain such increases in the amounts of
coverage required hereunder as may be reasonably requested by Lender, based on
then industry-standard amounts of coverage then being obtained by prudent
owners of properties similar to the Mortgaged Property in the same applicable market
region as the Mortgaged Property. 
Borrower shall give Lender prompt written notice if Borrower receives
from any insurer any written notification or threat of any actions or
proceedings regarding the non-compliance or non-conformity of the Mortgaged
Property with any insurance requirements.


 


(iii) If the Mortgaged Property shall be damaged or
destroyed, in whole or in part, by fire or other casualty, Borrower shall give
prompt notice thereof to Lender.


 


(A) In case of loss covered by Policies, Lender may
either (a) jointly with a Borrower settle and adjust any claim and agree with
the insurance company or companies on the amount to be paid on the loss or (b)
allow Borrower to agree with the insurance company or companies on the amount
to be paid upon the loss; provided, that Borrower may settle and adjust
losses without participation by Lender aggregating not in excess of 1% of the
Principal Indebtedness, agree with the insurance company or companies on the
amount to be paid upon the loss and collect and receipt for any such Insurance
Proceeds; provided, further, that if (x) at the time of the
settlement of such claim an Event of Default has occurred and is continuing or
(y) Lender and Borrower are unable to agree upon a joint settlement or (z)
Lender disapproves of Borrower’s proposed settlement with the insurance
company, then Lender shall settle and adjust such claim without the consent of
Borrower, and for such purpose is hereby irrevocably appointed as Borrower’s
attorney-in-fact, coupled with an interest. 
In any such case Lender shall and is hereby authorized to collect and
receipt for any such Insurance Proceeds subject to and to the extent provided
for in this Agreement.  The reasonable
out-of-pocket expenses incurred by Lender in the adjustment and collection of
Insurance Proceeds shall become part of the Indebtedness and be secured by the
Mortgages and shall be reimbursed by Borrower to Lender upon demand therefor.


 


(B) In the event of any insured damage to or
destruction of the Mortgaged Property or any part thereof (herein called an “Insured
Casualty”) where


 


(1) the
aggregate amount of the loss, as reasonably determined by an Independent
insurance adjuster, is less than ten percent (10%) of the Allocated Loan Amount
of the affected Mortgaged Property,


 


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(2) in the
reasonable judgment of Lender, the Mortgaged Property can be restored, replaced
and/or rebuilt (collectively, the “Restoration”) by not later than the
first to occur of (a) twelve (12) months after the date of casualty and (b) the
expiration of the business interruption insurance and, in any case, not later
than six (6) months prior to the Maturity Date to an economic unit
substantially in the condition it was in immediately prior to the Insured
Casualty and in compliance with all zoning, building and other applicable Legal
Requirements (the “Pre-Existing Condition”) not less materially valuable
(including an assessment of the impact of the termination of any Leases due to
such Insured Casualty) and not less useful than the same was prior to the
Insured Casualty,


 


(3) Lender
reasonably determines that the rental income of the Mortgaged Property, after
the Restoration thereof to the Pre-Existing Condition, will be sufficient to
meet all Operating Expenses, payments for reserves and payments of principal
and interest under the Loan and satisfy the Debt Service Coverage Test, and


 


(4) tenant
leases requiring payment of annual rent equal to at least seventy-five percent
(75%) of the gross revenues from the Mortgaged Property during the twelve (12)
month period immediately preceding the date of such fire or other casualty
remain in full force and effect during and after the Restoration of the
Mortgaged Property (subject to the rent abatement provisions thereof applicable
as a result of the casualty, so long as such abatement will end, and full
rental payments shall resume, upon substantial completion of the Restoration),


 


or if Lender otherwise
elects to allow a Borrower to restore the Mortgaged Property, then, if no Event
of Default shall have occurred and be continuing, the Insurance Proceeds (after
reimbursement of any reasonable out-of-pocket expenses incurred by Lender in
connection with the collection of any applicable Insurance Proceeds) shall be
made available to reimburse Borrower for the cost of restoring, repairing,
replacing or rebuilding the Mortgaged Property or part thereof subject to the
Insured Casualty, as provided for below. 
Borrower hereby covenants and agrees to commence and diligently to
prosecute such Restoration of the affected Mortgaged Property as nearly as
possible to the Pre-Existing Condition. 
Borrower shall pay all out-of-pocket costs (and if required by Lender,
Borrower shall deposit the total thereof with Lender in advance) of such
Restoration in excess of the Insurance Proceeds made available pursuant to the
terms hereof.


 


(C) Except as provided above, the Insurance Proceeds
collected upon any Insured Casualty shall, at the option of Lender in its sole
discretion, be applied to the payment of the Indebtedness or applied to the
cost of Restoration of the affected Mortgaged Property or part thereof subject
to the Insured Casualty, in the manner set forth below.


 


(D) Regardless of whether Insurance Proceeds, if any, are
sufficient or are made available to Borrower for the Restoration of any portion
of the affected Mortgaged Property, Borrower covenants to complete such
restoration of the affected Mortgaged Property to be of at least comparable
value as prior to such damage or destruction, all to be effected in accordance
with Legal Requirements and plans and specifications approved in advance by
Lender, such approval not to be unreasonably withheld or delayed.


 


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(E) In the event Borrower is entitled to reimbursement
out of Insurance Proceeds, such proceeds shall be held by Lender in the Loss
Proceeds Account and disbursed from time to time as the Restoration progresses
upon Lender being furnished with (1) evidence reasonably satisfactory to
it (which evidence may include inspection(s) of the work performed) that the
Restoration covered by the disbursement has been completed in accordance with
plans and specifications approved by Lender, (2) evidence reasonably satisfactory
to it of the estimated cost of completion of the Restoration, (3) funds,
or, at Lender’s option, assurances reasonably satisfactory to Lender that such
funds are available and sufficient in addition to the Insurance Proceeds to
complete the proposed Restoration, and (4) such architect’s certificates,
waivers of lien, contractor’s sworn statements, title insurance endorsements,
bonds and other evidences of cost, payment and performance of the foregoing
Restoration as Lender may reasonably require and approve.  Lender may, in any event, require that all
plans and specifications for such Restoration be submitted to and reasonably
approved by Lender prior to commencement of work.  Lender may retain a construction consultant to inspect such work
and review Borrower’s request for payments and Borrower shall, on demand by
Lender, reimburse Lender for the reasonable fees and disbursements of such
consultant.  No payment made prior to
the final completion of the Restoration shall exceed ninety percent (90%) of
the hard construction costs value of the work performed from time to time
(except for restoration work on a trade by trade basis or on an hourly basis
for professional services in which event, payment may be made in full upon the
completion of such work).  Any funds
other than Insurance Proceeds shall be disbursed prior to disbursement of such
proceeds; and, at all times, the undisbursed balance of such Insurance Proceeds
remaining in the Loss Proceeds Account, together with funds deposited therein
to pay the costs of the Restoration by or on behalf of Borrower, shall be at
least sufficient in the reasonable judgment of Lender to pay for the cost of
completion of the Restoration free and clear of all liens or claims for lien,
except for Permitted Encumbrances.  Any
surplus which may remain out of Insurance Proceeds held by Lender after payment
of such costs of restoration, repair, replacement or rebuilding shall, at the
option of Lender in its sole discretion, be applied to the payment of the
Indebtedness or be paid to Borrower so long as no Event of Default has occurred
and is continuing.


 


(F) Borrower shall not carry separate
insurance, concurrent in kind or form or contributing in the event of loss,
with any insurance required under this Agreement that would be considered
“co-insurance” or adversely affect the ability to collect under a policy of
insurance required hereunder.


 


(y)           Condemnation.


 


(i) Borrower shall promptly give Lender written notice
of the actual or threatened commencement of any proceeding for a Taking and
shall deliver to Lender copies of any and all papers served in connection with
such proceedings.  Lender is hereby
irrevocably appointed as Borrower’s attorney-in-fact, coupled with an interest,
with exclusive power to collect, receive and retain any Condemnation Proceeds
for said Taking.  With respect to any
compromise or settlement in connection with such proceeding, Lender shall
jointly with Borrower compromise and reach settlement unless at the time of
such Taking an Event of Default has occurred and is continuing and the
Indebtedness has been accelerated, in which event Lender shall compromise and
reach settlement without the consent of Borrower.  Notwithstanding the foregoing provisions of this Section 5.1(y),
Borrower is authorized to negotiate, compromise and settle, without
participation by Lender, Condemnation Proceeds of up to 1% of the Principal
Indebtedness in connection with any Taking. 
Notwithstanding any Taking, Borrower shall continue to pay the


 


80

















 


Indebtedness at the time and in the
manner provided for in this Agreement and the other Loan Documents and the
Indebtedness shall not be reduced except in accordance herewith.


 


(ii) Borrower shall cause the Condemnation Proceeds to
be paid directly to Lender.  Lender may,
in its sole discretion, apply any such Condemnation Proceeds to the reduction
or discharge of the Indebtedness (whether or not then due and payable).


 


(iii) With respect to a Taking in part, which shall
mean any Taking which does not render the affected Mortgaged Property
physically or economically unsuitable in the reasonable judgment of Lender for
the use to which it was devoted prior to the Taking, Borrower shall cause the
Condemnation Proceeds to be paid to Lender as described above, and if Lender
does not elect to apply the same to the Indebtedness as provided in Section 5.1(y)(ii)
above, Lender shall deposit such Condemnation Proceeds in the Loss Proceeds
Account and the same shall be made available for application to the cost of
Restoration of the affected Mortgaged Property and disbursed from time to time
as the Restoration progresses upon Lender being furnished with
(1) evidence reasonably satisfactory to it (which evidence may include
inspection(s) of the work performed) that the Restoration covered by the
disbursement has been completed in accordance with plans and specifications
approved by Lender, (2) evidence reasonably satisfactory to it of the estimated
cost of completion of the Restoration, (3) funds, or, at Lender’s option,
assurances satisfactory to Lender that such funds are available and sufficient
in addition to the Condemnation Proceeds to complete the proposed Restoration,
and (4) such architect’s certificates, waivers of lien, contractor’s sworn statements,
title insurance endorsements, bonds and other evidences of cost, payment and
performance of the foregoing repair, restoration, replacement or rebuilding as
Lender may reasonably require and approve.


 


(iv) Regardless of whether Condemnation Proceeds are
made available for such purpose, Borrower hereby covenants to complete the
Restoration of the affected Mortgaged Property as nearly as possible to the
Pre-Existing Condition and to be of at least comparable value and, to the
extent commercially practicable, of substantially the same character as prior
to the Taking, all to be effected in accordance with applicable law and plans
and specifications reasonably approved in advance by Lender.  Borrower shall pay all costs (and if
required by Lender, Borrower shall deposit the total thereof with Lender in
advance) of such Restoration in excess of the Condemnation Proceeds made
available pursuant to the terms hereof. 
Lender may, in any event, require that all plans and specifications for
such Restoration be submitted to and reasonably approved by Lender prior to
commencement of work.  Lender may retain
a construction consultant to inspect such work and review any request by
Borrower for payments and Borrower shall, on demand by Lender, reimburse Lender
for the reasonable fees and disbursements of such consultant.  No payment made prior to the final
completion of the Restoration shall exceed ninety percent (90%) of the hard
construction costs value of the construction work performed from time to time
(except for restoration work on a trade by trade basis or on an hourly basis
for professional services in which event, payment may be made in full upon the
completion of such work); funds other than Condemnation Proceeds shall be
disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of Lender, together
with funds deposited for that purpose or irrevocably committed to the repayment
of Lender by or on behalf of Borrower for that purpose, shall be at least
sufficient in the reasonable judgment of Lender to pay for the cost of
completion of the restoration, repair, replacement or rebuilding, free and
clear of all liens or claims for lien. 
Any surplus which may remain out of Condemnation Proceeds held by Lender
after payment of such costs of restoration, repair, replacement or rebuilding
shall, at the option of Lender in its sole discretion, be applied to the
payment of the Indebtedness or be paid to Borrower so long as no Event of
Default has occurred and is continuing.


 


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(v) If the affected Mortgaged Property is sold,
through foreclosure or otherwise, prior to the receipt by Lender of any such
Condemnation Proceeds to which it is entitled hereunder, Lender shall have the
right, whether or not a deficiency judgment on the Note shall have been sought,
recovered or denied, to have reserved in any foreclosure decree a right to
receive said award or payment, or a portion thereof sufficient to pay the
Indebtedness.  In no case shall any such
application reduce or postpone any payments otherwise required pursuant to this
Agreement, other than the final payment on the Note.


 


(z)  
         Leases and Rents.


 


(i) Borrower absolutely and unconditionally assigns to
Lender, Borrower’s right, title and interest in all current and future Leases
and Rents as collateral for the Loan, it being intended by Borrower that this
assignment constitutes a present, absolute assignment and not an assignment for
additional security only.  Such
assignment to Lender shall not be construed to bind Lender to the performance
of any of the covenants, conditions or provisions contained in any such Lease
or otherwise impose any obligation upon Lender.  Borrower shall execute and deliver to Lender such additional
instruments, in form and substance reasonably satisfactory to Lender, as may
hereafter be reasonably requested in writing by Lender to further evidence and
confirm such assignment.  Nevertheless,
subject to the terms of this Section 5.1(z), Lender grants to
Borrower a license to lease, maintain, operate and manage the Mortgaged
Property and to collect, use and apply the Rents in accordance with the terms
hereof and otherwise act as the landlord under the Leases, which license shall
be deemed automatically revoked upon the occurrence and during the continuance
of an Event of Default under this Agreement. 
Any portion of the Rents held by Borrower shall be held in trust for the
benefit of Lender for use in the payment of the Indebtedness.  Upon the occurrence of an Event of Default
and during the continuance thereof, the license granted to Borrower herein
shall automatically be revoked, and Lender shall immediately be entitled to
possession of all Rents, whether or not Lender enters upon or takes control of
the Mortgaged Property.  Lender is
hereby granted and assigned by Borrower the right, at its option, upon
revocation of the license granted herein, to enter upon the Mortgaged Property
in person, by agent or by court-appointed receiver to collect the Rents.  Any Rents collected after the revocation of
the license shall be applied toward payment of the Indebtedness as set forth in
Section 2.8 hereof.


 


(ii) All Leases entered into by Borrower shall provide
for rental rates comparable to then-existing local market rates and terms and
conditions commercially reasonable and consistent with then-prevailing local
market terms and conditions for similar type properties, and in no event shall
Borrower, absent Lender’s prior written consent, which consent shall not be
unreasonably withheld or delayed, enter into any Leases (a) other than leases
of Homesites to owners and occupants of residential manufactured homes or
mobile homes having lease terms not in excess of two years, and (b) with any
Affiliates of Borrower, except as indicated in Schedule 4 attached
hereto.  Borrower shall furnish Lender
with (1) detailed term sheets in advance in the case of any Leases,
modifications, amendments or renewals for which Lender’s consent is required
and (2) in the case of any other Leases, executed copies of such Leases upon
written request.  All renewals or
amendments or modifications of Leases that do not satisfy the requirements of
the first sentence of this Section 5.1(z)(ii) shall be subject to
the prior approval of Lender, which approval shall not be unreasonably withheld
or delayed.  All Leases entered into
after the Closing Date with new tenants (i.e. not renewals of existing tenants
as of the Closing Date) shall be written on the standard lease form for new
tenants previously approved by Lender which form as of the Closing Date is set
forth on Schedule 10 attached hereto; provided that notwithstanding the
foregoing, the Borrower may modify any standard lease form without such
approval to the extent necessary to conform such form to any applicable Legal
Requirements (and, upon reasonable


 


82

















 


request of the Lender, the Borrower
shall notify the Lender in writing with respect to any such modification).  The Borrower shall not materially change the
standard lease form without Lender’s prior written consent, which consent shall
not be unreasonably withheld or delayed, or except as necessary to comply with
applicable Legal Requirements. 
Borrower,


 


(A)          shall observe and perform all of the
material obligations imposed upon the lessor under the Leases and shall not do
or permit to be done anything to materially impair the value of the Leases as
security for the Indebtedness;


 


(B)           shall not execute any other assignment
of lessor’s interest in any of the Leases or Rents;


 


(C)           shall enforce all of the material
terms, covenants and conditions contained in the Leases upon the part of the
lessee thereunder to be observed or performed and shall effect a termination or
diminution of the obligations of tenants under leases, only in a manner that a
prudent owner of a similar property to the Mortgaged Property would enforce
such terms covenants and conditions or effect such termination or diminution in
the ordinary course of business;


 


(D)          except as otherwise set forth in the
Monthly Statement submitted to Lender, shall not collect any of the Rents more
than one (1) month in advance; and


 


(E)           shall not convey or transfer or
suffer or permit a conveyance or transfer of the Mortgaged Property or of any
interest therein so as to effect a merger of the estates and rights of, or a
termination or diminution of the obligations of, lessees thereunder.


 


(iii) Borrower shall deposit security deposits of
lessees which are turned over to or for the benefit of Borrower or otherwise
collected by or on behalf of Borrower, into the Security Deposit Account and
shall not commingle such funds with any other funds of Borrower.  Any bond or other instrument which Borrower
is permitted to hold in lieu of cash security deposits under any applicable
Legal Requirements shall be maintained in full force and effect unless replaced
by cash deposits as hereinabove described, shall, if permitted pursuant to
Legal Requirements, name Lender as payee or mortgagee thereunder (or at
Lender’s option, be fully assignable to Lender) and shall, in all respects,
comply with any applicable Legal Requirements and otherwise be reasonably
satisfactory to Lender.  Borrower shall,
upon request, provide Lender with evidence reasonably satisfactory to Lender of
Borrower’s compliance with the foregoing. 
Upon the occurrence and during the continuance of any Event of Default,
Borrower shall, upon Lender’s request, if permitted by any applicable Legal
Requirements, turn over to Lender the security deposits (and any interest
theretofore earned thereon) with respect to all or any portion of the Mortgaged
Property, to be held by Lender subject to the terms of the Leases.


 


(aa)         Maintenance
of Mortgaged Property.  Borrower
shall cause the Mortgaged Property to be maintained in a good and safe
condition and repair, subject to wear and tear and damage caused by casualty or
condemnation.  The Improvements and the
Equipment shall not be removed, demolished or altered (except for (1) normal
replacement of the Equipment, (2) Improvements contemplated in an approved
Operating Budget or pursuant to Leases in effect from time to time,
(3) removals, demolition or alterations that do not cost more than 1% of
the Principal Indebtedness or (4) an emergency which the Borrower shall
have notified the Lender of in writing, including the action taken to
remediate) without the consent of Lender which consent shall not be
unreasonably withheld or delayed. 
Except with respect to an Insured Casualty which shall be governed by
the terms and conditions provided herein, Borrower shall, or shall cause any
tenants obligated under their respective Leases to,


 


83

















 


promptly
repair, replace or rebuild any part of the Mortgaged Property that becomes
damaged, worn or dilapidated.  Borrower
shall complete and pay for any structure at any time in the process of
construction or repair on the Land.  Borrower
shall not initiate, join in, or consent to any change in any private restrictive
covenant, zoning law or other public or private restriction, limiting or
defining the uses which may be made of any Mortgaged Property or any part
thereof without the written consent of Lender which consent shall not be
unreasonably withheld or delayed.  If
under applicable zoning provisions the use of all or any portion of the
Mortgaged Property is or shall become a nonconforming use, Borrower will not
cause or permit such nonconforming use to be discontinued or abandoned if such
discontinuance of abandonment would cause such nonconforming use to no longer
be permitted without the express written consent of Lender which consent shall
not be unreasonably withheld or delayed. 
Borrower shall not (i) change the use of any of the Land or Improvements
in any material respect, (ii) permit or suffer to occur any waste on or to
any Mortgaged Property or to any portion thereof or (iii) take any steps
whatsoever to convert any Mortgaged Property, or any portion thereof, to a
condominium or cooperative form of management.


 


(bb)         Qualified
Interest Rate Cap Provider.


 


(i)  In
connection with the exercise of an Extension Option, Borrower shall provide to
Lender (1) the material terms of any interest rate cap agreement which Borrower
proposes entering into pursuant to this Agreement with a counterparty other
than an Affiliate of Lender and (2) until the close of business on the
Business Day on which such material terms are received the opportunity to offer
to Borrower an interest rate cap agreement on the same or better terms as the
terms offered to Borrower by such other counterparty.  In the event that Lender or any of its Affiliates shall offer to
Borrower an interest rate cap agreement with the same or better terms as the terms
offered to Borrower by such third party counterparty, Borrower shall enter into
such interest rate cap agreement with Lender or its Affiliate, as the case may
be.


 


(ii)  If the
rating of a Qualified Interest Rate Cap Provider that has provided an interest
rate cap which Borrower pledges to Lender pursuant to the Collateral Assignment
of Hedge falls below the rating criteria specified in the definition of a
Qualified Interest Rate Cap Provider, then within ten (10) Business Days
following written request from Lender, Borrower shall deliver or cause the
original rate cap provider to deliver to Lender a replacement interest rate cap
satisfying all of the criteria set forth in Section 3.1(c) (if such
ratings downgrade occurs prior to the Original Maturity Date) or 2.17
(if such ratings downgrade occurs prior to the Original Maturity Date), as
applicable.


 


(cc)         Prohibited
Persons.  Borrower covenants and
agrees to deliver (from time to time) to Lender any certification or other
evidence as may be requested by Lender in its sole and absolute discretion,
confirming that: (i) neither Borrower, Member, General Partner, Guarantor
nor their respective officers, directors, partners, members or majority-owned
Affiliates is a Prohibited Person; and (ii) neither Borrower, Member,
General Partner, Guarantor nor their respective officers, directors, partners,
members or majority-owned Affiliates has engaged in any business, transaction
or dealings with a Person known to Borrower to be a Prohibited Person,
including, but not limited to, the making or receiving of any contribution of
funds, goods, or services, to or for the benefit of a Person known to Borrower
to be a Prohibited Person.


 


(dd)         Laundry
Leases.  Certain laundry facilities
at certain of the Mortgaged Properties have been leased to laundry operators
under laundry room or laundry facility leases (the “Laundry Leases”).  Borrower covenants and agrees that is shall,
within sixty (60) days after the date hereof (or such longer time as Lender may
determine to provide to Borrower at Lender’s sole option) provide copies of
such Laundry Leases to Lender and, if such Laundry Leases are not by their
terms subordinate to the


 


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applicable
Mortgages, Borrower shall, within sixty (60) days after the date hereof (or such
longer time as Lender may determine to provide to Borrower at Lender’s sole
option) either provide executed subordination agreements subordinating the
Laundry Leases to the applicable Mortgages or demonstrate to Lender’s
reasonable satisfaction that the Laundry Leases may be terminated by the
landlord thereunder at a cost per Laundry Lease of not more than $10,000.


 


ARTICLE VI.

NEGATIVE COVENANTS


 


Section 6.1.            Negative
Covenants.  Borrower covenants and
agrees that, until payment in full of the Indebtedness, it will not do,
directly or indirectly, any of the following unless Lender consents thereto in
writing:


 


(a)           Liens
on the Mortgaged Property.  Incur,
create, assume, become or be liable in any manner with respect to, or permit to
exist, except as permitted by Section 5.1(b) above, any Lien with
respect to any Mortgaged Property or any portion thereof, except: (i) Liens in
favor of Lender and (ii) the Permitted Encumbrances.


 


(b)  
        Ownership and Transfer.  Except as expressly permitted by or pursuant
to this Agreement or the other Loan Documents, own any property of any kind
other than the Mortgaged Property, or Transfer any Mortgaged Property or any
portion thereof.


 


(c)  
        Other Borrowings.  Incur, create, assume, become or be liable
in any manner with respect to Other Borrowings.


 


(d)  
        Dissolution; Merger or
Consolidation. Dissolve, terminate, liquidate, merge with or consolidate
into another Person.


 


(e)  
        Change In Business.  Make any material change in the scope or
nature of its business objectives, purposes or operations, or undertake or
participate in activities other than the continuance of its present business.


 


(f)  
         Debt Cancellation.  Cancel or otherwise forgive or release any
material claim or debt owed to Borrower by any Person, except for adequate
consideration or in the ordinary course of Borrower’s business.


 


(g)  
        Affiliate Transactions.  Except for fees payable to Manager under the
Management Agreement, (i) pay any management, consulting, director or similar
fees to any Affiliate of Borrower or to any director or manager (other than any
customary fees of the Independent Director/Manager), officer or employee of
Borrower, (ii) directly or indirectly enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of Borrower or with any
director, officer or employee of any Affiliate of Borrower, except transactions
in the ordinary course of and pursuant to the reasonable requirements of the
business of Borrower and upon fair and reasonable terms which are no less
favorable to Borrower than would be obtained in a comparable arm’s length
transaction with a Person that is not an Affiliate of Borrower, or
(iii) make any payment or permit any payment to be made to any Affiliate
of Borrower when or as to any time when any Event of Default shall exist.


 


(h)  
        Creation of Easements.  Except as expressly permitted by or pursuant
to the Mortgages or this Agreement, create, or permit any Mortgaged Property or
any part thereof to become subject to, any easement, license or restrictive
covenant, other than a Permitted Encumbrance, provided,


 


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that the
consent of Lender shall not be unreasonably withheld or delayed to the extent
that any such easement, license or restrictive covenant is reasonably necessary
for the continued use, enjoyment, access to or operation of the applicable
Mortgaged Property.


 


(i)  
         Misapplication of Funds.  Distribute any Rents or Moneys received from
Accounts in violation of the provisions of Section 2.12, or fail to
pledge any security deposit to Lender, or misappropriate any security deposit
or portion thereof.


 


(j)  
         Certain Restrictions.  Amend, modify or waive any of its rights
under the Master Homesite Lease Agreement.


 


(k)  
        Assignment of Licenses
and Permits.  Assign or transfer any
of its interest in any Permits pertaining to any Mortgaged Property, or assign,
transfer or remove or permit any other Person to assign, transfer or remove any
records pertaining to any Mortgaged Property.


 


(l)  
         Place of Organization.  Change its jurisdiction of organization,
creation or formation, as applicable, without giving Lender at least fifteen
(15) days’ prior written notice thereof and promptly providing Lender such
information as Lender may reasonably request in connection therewith.


 


(m)  
       Leases.  Enter into, amend or cancel Leases, except
as permitted by this Agreement.


 


(n)  
        Management Agreement.  Except in accordance with this Agreement,
(i) terminate or cancel the Management Agreement, (ii) consent to either
the reduction of the term of or the assignment of the Management Agreement,
(iii) increase or consent to the increase of the amount of any charges under
the Management Agreement, or (iv) otherwise modify, change, supplement, alter
or amend, or waive or release any of its rights and remedies under, the
Management Agreement in any material respect.


 


(o)  
        Plans and Welfare Plans.  Knowingly engage in or permit any transaction
in connection with which Borrower or any ERISA Affiliate could be subject to
either a material civil penalty or tax assessed pursuant to Section 502(i)
or 502(1) of ERISA or Section 4975 of the Code, permit any Welfare Plan to
provide benefits, including without limitation, medical benefits (whether or
not insured), with respect to any current or former employee of Borrower beyond
his or her retirement or other termination of service other than (i) coverage
mandated by applicable law, (ii) death or disability benefits that have been
fully provided for by paid up insurance or otherwise or (iii) severance
benefits (unless such coverage is provided after notification of and with the
reasonable approval of Lender or pursuant to an employment or severance agreement
entered into in the ordinary course of business consistent with past practice),
permit the assets of Borrower to become “plan assets”, whether by operation of
law or under regulations promulgated under ERISA or adopt, amend (except as may
be required by applicable law) or materially increase the amount of any benefit
or amount payable under, or permit any ERISA Affiliate to adopt, amend (except
as may be required by applicable law) or materially increase the amount of any
benefit or amount payable under, any Plan or Welfare Plan, except for normal
increases in the ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase in benefits
expense to Borrower or any ERISA Affiliate.


 


(p)  
        Transfer of Ownership
Interests.  Permit any Transfer of a
direct or indirect ownership interest or voting right in Borrower (other than a
Permitted Transfer).


 


(q)  
        Equipment and Inventory.  Except pursuant to the Management Agreement,
permit any Equipment owned by Borrower to be removed at any time from any
Mortgaged Property


 


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unless
the removed item is consumed or sold in the usual and customary course of
business, removed temporarily for maintenance and repair or, if removed
permanently, replaced by an article of equivalent suitability and not
materially less value, owned by Borrower free and clear of any Lien (other than
Permitted Encumbrances).


 


(r)  
         Management Fees.  Pay Borrower or any Affiliate of Borrower
any management fees with respect to the Mortgaged Property except for
management fees paid to Manager under the Management Agreement.


 


(s)  
        Prohibited Persons.  With respect to Borrower, Member, General
Partner, Guarantor and any of their respective officers, directors, partners,
members or majority-owned Affiliates: (i) conduct any business, or engage
in any transaction or dealing, with any Person known to Borrower to be a
Prohibited Person, including, but not limited to, the making or receiving of
any contribution of funds, goods, or services, to or for the benefit of a
Prohibited Person; or (ii) engage in or conspire to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding,
or attempts to violate, any of the prohibitions set forth in EO13224.


 


(t)  
         Modification of
Interest Rate Cap Agreement.  Amend,
modify, cancel or terminate any interest rate cap entered into by Borrower
pursuant to this Agreement or permit same to be amended, modified, cancelled or
terminated.


 


ARTICLE VII.

EVENT OF DEFAULT


 


Section 7.1. 
          Event of Default.  The occurrence of one or more of the
following events shall be an “Event of Default” hereunder:


 


(a)  
        if on any Payment Date
Borrower fails to pay any accrued and unpaid interest on the Loan or scheduled
deposits into the Reserve Accounts when due and payable in accordance with the
provisions hereof, or any Release Price then due and payable in accordance with
the provisions hereof;


 


(b)  
        if Borrower fails (1) to
pay the outstanding Indebtedness on the Maturity Date or (2) to deposit into
the Collection Account, the amount required pursuant to Sections 2.7(a)(i);


 


(c)  
        if Borrower fails to pay or
deposit any other amount payable or required to be deposited pursuant to this
Agreement or any other Loan Document when due and payable in accordance with
the provisions hereof or thereof, as the case may be, and such failure
continues for ten (10) days after Lender delivers written notice thereof to
Borrower (other than the failure of the Lender to transfer available funds from
the Collection Account to a Reserve Account pursuant to Section 2.12(b));


 


(d)  
        if any representation or
warranty made herein or in any other Loan Document, or in any report,
certificate, financial statement or other Instrument, agreement or document
furnished by Borrower, General Partner, Member or Guarantor in connection with
this Agreement, the Note or any other Loan Document shall be false or
materially misleading as of the date such representation or warranty was made
(or if such representation or warranty relates to an earlier date, then as of
such earlier date);


 


(e)  
        if Borrower or the General
Partner or the Guarantor makes an assignment for the benefit of creditors;


 


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(f)  
         if a receiver, liquidator
or trustee shall be appointed for Borrower or the General Partner or the
Guarantor or if Borrower or the General Partner or the Guarantor shall be
adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any
similar federal or state law, shall be filed by or against, consented to, or
acquiesced in by, Borrower or the General Partner or the Guarantor, or if any
proceeding for the dissolution or liquidation of Borrower or the General
Partner or the Guarantor shall be instituted; provided, however,
that if such appointment, adjudication, petition or proceeding was involuntary
and not consented to by Borrower or the General Partner or the Guarantor, upon
the same not being discharged, stayed or dismissed within ninety (90) days, or
if Borrower or the General Partner or the Guarantor shall generally not be
paying its debts as they become due;


 


(g)  
        if Borrower attempts to
delegate its obligations or assign its rights under this Agreement, any of the
other Loan Documents or any interest herein or therein, or if any Transfer of
any Mortgaged Property or any interest therein occurs, or any direct or
indirect Transfer of any direct or indirect ownership interest in Borrower
occurs, other than in accordance with or as permitted under this Agreement;


 


(h)  
        if any breach or failure to
perform any of the covenants in Article VI hereof shall occur, which breach or
failure to perform, in the case of Section 6.1(o) or (q)
only, shall remain uncured for a period of thirty (30) days after the
occurrence of such breach or failure to perform or if any material breach or
failure to perform any of the covenants in Article VIII hereof shall occur;


 


(i)  
         if an Event of Default as
defined or described in the Note or any other Loan Document occurs, whether as
to Borrower or the Mortgaged Property or any portion thereof;


 


(j)  
         if any of the assumptions
made with respect to Borrower and its Affiliates in that certain substantive
non-consolidation opinion letter dated as of February 18, 2004 delivered by
Holme Roberts & Owen LLP in connection with the Loan is not true and
correct in all respects;


 


(k)  
        if Borrower fails to
maintain any insurance required to be maintained pursuant to Section 5.1(x)
hereof; and


 


(l)  
         if Borrower shall fail to
perform any of the terms, covenants or conditions of this Agreement, the Note,
the Mortgages or the other Loan Documents, other than as specifically otherwise
referred to above in this definition of “Event of Default,” for ten (10) days
after notice to Borrower from Lender or its successors or assigns, in the case
of any Default which can be cured by the payment of a sum of money, or for
thirty (30) days after notice from Lender or its successors or assigns, in the
case of any other Default (unless a longer notice period is otherwise provided
herein or in such other Loan Document); provided, however, that
if such non-monetary Default is susceptible of cure but cannot reasonably be
cured within such thirty (30) day period and such Borrower shall have commenced
to cure such Default within such thirty (30) day period and thereafter
diligently and expeditiously proceeds to cure the same, such thirty (30) day
period shall be extended for an additional thirty (30) days;


 


then, upon the occurrence of any such Event of Default
and at any time thereafter, Lender or its successors or assigns, may, in
addition to any other rights or remedies available to it pursuant to this Agreement
and the other Loan Documents, or at law or in equity, take such action, without
further notice or demand, as Lender or its successors or assigns, deems
advisable to protect and enforce its rights against Borrower and in and to all
or any portion of the Collateral and may enforce or avail itself of any or all
rights or remedies provided in the Loan Documents against Borrower and/or the
Collateral (including, without limitation, all rights or remedies available at
law or in equity).  In addition to and without
limiting the foregoing, upon the occurrence of any Event of Default described
in any of Sections 7.1(e), (f), or (g),


 


88

















 


the unpaid principal amount of and accrued interest
and fees on the Loan and all other Indebtedness shall automatically become
immediately due and payable, without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration or other requirements of any kind,
all of which are hereby expressly waived by Borrower.  Upon and at any time after the occurrence of any other Event of
Default, at the option of Lender, which may be exercised without notice or
demand to anyone, all or any portion of the Loan and other Indebtedness shall
immediately become due and payable.


 


Section 7.2. 
          Remedies.  


 


(a)  
        Upon the occurrence of an
Event of Default, all or any one or more of the rights, powers, other remedies
available to Lender against Borrower under this Agreement or any of the other
Loan Documents executed by or with respect to Borrower, or at law or in equity
may be exercised by Lender at any time and from time to time, whether or not
all or any portion of the Indebtedness shall be declared due and payable, and
whether or not Lender shall have commenced any foreclosure proceeding or other
action for the enforcement of its rights and remedies under any of the Loan
Documents with respect to all or any portion of the Collateral.  Any such actions taken by Lender shall be
cumulative and concurrent and may be pursued independently, singly,
successively, together or otherwise, at such time and in such order as Lender
may determine in its sole discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of
Lender permitted by law, equity or contract or as set forth herein or in the
other Loan Documents.


 


(b)  
        In the event of the
foreclosure or other action by Lender to enforce Lender’s remedies in
connection with all or any portion of the Collateral, Lender shall apply all
Net Proceeds received to repay the Indebtedness in accordance with Section 2.8,
the Indebtedness shall be reduced to the extent of such Net Proceeds and the
remaining portion of the Indebtedness shall remain outstanding and secured by
the Loan Documents, it being understood and agreed by Borrower that Borrower is
liable for the repayment of all the Indebtedness; provided, however,
that the Note shall be deemed to have been accelerated only to the extent of
the Net Proceeds actually received by Lender with respect to the Collateral and
applied in reduction of the Indebtedness evidenced by the Note in accordance
with the provisions of this Agreement, after payment by Borrower of all
Transaction Costs and costs of enforcement.


 


(c)  
        Upon and during the
continuation of an Event of Default, Lender shall have the right, but not the
obligation, with respect to any and all bankruptcy proceedings that are now or
hereafter commenced in connection with the Mortgaged Property, to (i) vote to
accept or reject any plans of reorganization, (ii) vote in any election of a
trustee, (iii) elect the treatment of secured claims as specified in Section 1111(b)
of the Bankruptcy Code, and (iv) make any other decisions requested of holders
of claims or interests that Borrower would have had the right to do in such
bankruptcy proceedings in the absence of an Event of Default.


 


Section 7.3. 
          Remedies Cumulative.  The rights, powers and remedies of Lender
under this Agreement shall be cumulative and not exclusive of any other right,
power or remedy which Lender may have against Borrower pursuant to this
Agreement or the other Loan Documents executed by or with respect to Borrower,
or existing at law or in equity or otherwise. 
Lender’s rights, powers and remedies may be pursued singly, concurrently
or otherwise, at such time and in such order as Lender may determine in
Lender’s sole discretion.  No delay or
omission to exercise any remedy, right or power accruing upon an Event of
Default shall impair any such remedy, right or power or shall be construed as a
waiver thereof, but any such remedy, right or power may be exercised from time
to time and as often as may be deemed expedient.  A waiver of any Default or Event of Default shall not be
construed to be a waiver of any subsequent Default or Event of Default or to
impair any remedy, right or power consequent thereon.  Notwithstanding any other provision of this Agreement, Lender
reserves the right to seek a


 


89

















 


deficiency judgment or
preserve a deficiency claim, in connection with the foreclosure of any Mortgage
on the Mortgaged Property, to the extent necessary to foreclose on other parts
of the Collateral.


 


Section 7.4. 
          Default Administration
Fee.  At any time after the occurrence
of an Event of Default and the acceleration of the Indebtedness, as
reimbursement and compensation for the additional internal expenditures,
administrative expenses, fees and other costs associated with actions to be
taken in connection with such Event of Default, and regardless of whether
Lender shall have commenced the exercise of any remedies pursuant to Section 7.2,
the Default Administration Fee shall be payable by Borrower to Lender upon
demand.


 


Section 7.5. 
          Curative Advances.  If any Event of Default occurs and is not
cured by Borrower after notice from Lender, then Lender may expend such sums as
either shall reasonably deem appropriate to cure or attempt to cure such Event
of Default.  Borrower shall immediately
repay all such sums so advanced, which sums shall immediately become part of
the Indebtedness, bear interest at the Default Rate from the date advanced
until the date repaid, and be secured by all Collateral.


 


ARTICLE VIII.

SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,

WARRANTIES AND COVENANTS


 


Section 8.1. 
          Applicable to Borrower.  Borrower hereby acknowledges that, as a
condition of Lender’s agreements and performance of its obligations hereunder,
Lender is relying on the status of Borrower as a legal entity separate and
apart from any Affiliate or other entity and has required that Borrower
maintain such status, and Lender hereby acknowledges such reliance and
requirement.  Accordingly, Borrower
hereby represents, warrants and covenants as of the Closing Date and until such
time as the Loan is paid in full, that absent express advance written waiver
from Lender, which may be withheld the Lender’s sole discretion, Borrower:


 


(a)  
        was and will be organized
solely for purpose of owning and operating the Mortgaged Property;


 


(b)           has not owned, does
not own and will not own any assets other than the Mortgaged Property
(including incidental personal property necessary for the operation thereof and
proceeds therefrom);


 


(c)  
        was not engaged, is not
engaged and will not engage in any business, directly or indirectly, other than
the ownership, management and operation of the Mortgaged Property;


 


(d)  
        has not entered into and
will not enter into any contract or agreement with any partner, member,
shareholder, trustee, beneficiary, principal, joint venturer or Affiliate of
Borrower except in the ordinary course of its business pursuant to written
agreements upon terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an arms-length basis
with third parties other than such Affiliate;


 


(e)  
        has not incurred and will
not incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than (i) the Loan, and (ii) trade payables
incurred in the ordinary course of business with trade creditors in connection
with owning, operating and maintaining the Mortgaged Property, in such amounts
as are normal and reasonable under the circumstances, provided such debt is not
evidenced by a promissory note or other security instrument and is not at any
time in an aggregate amount in excess of two percent (2%) of the Principal
Indebtedness, and further provided that all such trade debts are paid within
sixty (60) days after the same are incurred


 


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(excluding
therefrom any equipment financing paid within sixty (60) days after the same
are incurred and trade payables being disputed or contested in good faith by
the Borrower and in the same manner and with the same deposits as Lien Claims
set forth in Section 5.1(b)(ii) of this Agreement;)


 


(f)  
         has not made and will not
make any loan or advances to any Person (including any of its Affiliates), or
pledge its assets for the benefit of any other Person, or seek or obtain credit
or incur any obligation to any third party based upon the assets of any other
Person, or induce any third party to rely on the creditworthiness of any other
Person;


 


(g)  
        has remained and as of the
Closing Date reasonably expects to remain, solvent, and has maintained, and as
of the Closing Date reasonably expects to maintain adequate capital for the
normal obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations;


 


(h)           has not acquired and
will not acquire obligations or securities of any Person;


 


(i)  
         has not failed and will
not fail to correct any known misunderstanding or misrepresentation regarding
its separate identity;


 


(j)  
         has done or caused to be
done and will do all things necessary to preserve its existence;


 


(k)  
        shall continuously maintain
its existence and good standing and be qualified to do business in all states
necessary to carry on its business, including the state in which the Mortgaged
Property is located;


 


(l)  
         has conducted and operated
and will conduct and operate its business solely in its own name, with all oral
and written communications from Borrower, including, without limitation,
correspondence, invoices, purchase orders, billing statements, applications and
business forms, made solely in the name of Borrower;


 


(m)  
       has accurately maintained
and will continue to accurately maintain books, records, bank accounts,
accounting records, financial statements and other entity documents separate
from those of its partners, members, shareholders, trustees, beneficiaries,
principals, Affiliates, and any other Person, with such accounting records and
financial statements having been prepared and kept in accordance with
reasonable accounting practices applied on a consistent basis, and such
financial statements of Borrower shall be prepared in a manner that indicates
(through appropriate footnotes if necessary) the existence of Borrower and its
assets and liabilities separate and apart from any other Person; moreover,
Borrower shall indicate in its financial statements that the assets of Borrower
are not available to satisfy the claims of creditors of any Affiliate of
Borrower and that the assets of any Affiliate of Borrower are not available to satisfy
the claims of creditors of Borrower and, except with appropriate designation as
set forth above, Borrower shall not authorize its assets or liabilities to be
listed on the financial statement of any other Person;


 


(n)  
        has been and will be, and at
all times has held and will hold itself out to the public as, a legal entity
separate and distinct from any other Person (including any of its partners,
members, shareholders, trustees, beneficiaries, principals and Affiliates, and
any Affiliates of any of the same), and not as a department or division of any
Person;


 


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(o)  
        has and will file such tax
returns with respect to itself as may be required under applicable law and has
prepared and will prepare separate tax returns and financial statements, or if
part of a consolidated group, is shown as a separate member of such group;


 


(p)  
        has paid and shall pay its
own liabilities, indebtedness, and obligations of any kind, as the same shall
become due, from its own separate assets, rather than from those of other
Persons, and Borrower shall not consent to any Person operating the Mortgaged
Property to incur expenses as agent or on behalf of Borrower, unless such
Person agrees, prior to incurring such expense, to clearly indicate that such
expenses are the sole responsibility of, and any payment will come from,
Borrower;


 


(q)  
        has not and will not enter
into any transaction of merger or consolidation, or acquire by purchase or
otherwise all or substantially all of the business or assets of, or any stock
or beneficial ownership of, any Person;


 


(r)  
         has not commingled and
will not commingle or permit to be commingled its funds or other assets with
those of any other Person; and has held and will hold title to all of its real
and personal property in its own name and not in the name of any other Person;


 


(s)  
        has maintained and will
maintain its assets in such a manner that it is not costly or difficult to
segregate, ascertain or identify its individual assets from those of any other
Person;


 


(t)  
         has not, does not and will
not hold itself out to be responsible for the debts or obligations of any other
Person and, except for the Loan Documents to which other Persons are party,
shall not consent to any other Person holding itself out as being responsible
for the debts or obligations of Borrower;


 


(u)  
        has not and will not
assume, guarantee or otherwise become liable on or in connection with any
obligation of any other Person and, except for the Loan Documents to which
other Persons are party, shall not consent to any other Person guaranteeing,
assuming or otherwise becoming liable for any obligation of Borrower;


 


(v)  
        except for funds deposited
into the Local Collection Account, the Collection Account or the Reserve
Accounts in accordance with the Loan Documents, has not and shall not hold
title to its assets other than in its name;


 


(w)  
       complies and shall at all
times hereafter comply with all of the assumptions, statements, certifications,
representations, warranties and covenants regarding or made by it contained in
or appended to the nonconsolidation opinion delivered pursuant hereto;


 


(x)  
         has paid and will pay its
own liabilities and expenses, out of its own funds and shall not consent to any
other Person paying Borrower’s obligations except to the extent that timely
reimbursement is made for the same;


 


(y)  
        has held and will hold
regular meetings, as appropriate to conduct its business and has observed at
all times  and will observe all limited
liability company formalities and record keeping;


 


(z)  
         has allocated and will
allocate to Borrower reasonably and on the basis of fair market value
determined on an arms-length basis all general overhead and administrative
expenses, including all costs associated with common employees and shared
office space, any such allocation shall be specifically and reasonably
documented and substantiated, any such allocation of expenses to


 


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Borrower
shall be paid solely by Borrower from Borrower’s own funds, and Borrower shall
at all times use separate stationary, letterhead, invoices and checks;


 


(aa)         has not and will not
identify its members or partners, Independent Director/Manager (as defined
below) or any other member or partner of any Affiliate of Borrower, or any
other Person, as a division or part of it;


 


(bb)         has paid and will pay
the salaries of its own employees and has maintained and will maintain a
sufficient number of employees in light of its contemplated business
operations;


 


(cc)         has maintained,
currently maintains, and will continue to maintain, its own cash, cash
positions and bank accounts separate from any other Person;


 


(dd)         shall not (i)
liquidate or dissolve, in whole or in part; (ii) consolidate, merge or enter
into any form of consolidation with or into any other Person, nor convey,
transfer or lease its assets substantially as an entirety to any Person (other
than in accordance with Section 2.7(a) hereof) nor permit any Person
to consolidate, merge or enter into any form of consolidation with or into
itself, nor convey, transfer or lease its assets substantially as an entirety
to any Person; (iii) engage in any business other than the ownership and
operation of the Mortgaged Property; or (iv) amend any provisions of its
organizational documents containing provisions similar to those contained in
this Article VIII;


 


(ee)         is either (x) a
limited partnership duly formed and existing under the laws of the State of
Texas with one general partner (that being the General Partner) whose limited
partnership agreement and, in the case of the General Partner, whose limited
liability company agreement contains each of the representations, warranties
and covenants set forth in this Article VIII (other than in the case of the
General Partner (gg) and (hh)) or (y) a limited liability company duly
formed and existing under the laws of the State of Delaware with one (1) equity
member (the “Single Member”) in addition to the Independent Manager,
whose limited liability company agreement (the “Borrower Organizational
Documents”) contains each of the representations, covenants and warranties
set forth in this Article VIII and requires General Partner (in the
case of a limited partnership) or Borrower (in the case of a limited liability
company) to at all times cause there to be at least one (1) duly appointed
independent director or independent manager, as applicable, who is a natural
person and also a non-economic member of Borrower (in the case of a limited
liability company) (each, an “Independent Director/Manager”) whose
affirmative vote will be required in order for a voluntary filing for
protection under the Bankruptcy Code or similar action by Borrower (and General
Partner, if applicable) and who is not at the time of such individual’s initial
appointment as Independent Director/Manager, shall not be during such
individual’s tenure as Independent Director/Manager, and may not have been at
any time during the preceding five years, (i) a shareholder, member or partner
of, or an officer, manager, director, except in his or her capacity as
Independent Director/Manager of Borrower (and General Partner, if applicable),
paid consultant or employee of, customer of or supplier to or a member of the
immediate family of Borrower (except in his or her capacity as Independent
Director/Manager of Borrower (and General Partner, if applicable) or any of its
shareholders, members, partners, subsidiaries or affiliates or (ii) any person
or other entity controlling or under common control with any such shareholder,
member, partner, officer, manager, director, employee, supplier or customer or
any member of the immediate family of any of them; provided, however,
that the foregoing limitations on the use of persons who are Affiliates of
Borrower as Independent Director/Manager shall not apply to Borrower’s use of
natural persons employed by CT Corporation or any reputable, national service
similar to CT Corporation and reasonably approved by Lender to fill the position
of Independent Director/ Manager required hereunder, notwithstanding that such
persons may also act as independent directors of such Affiliates of Borrower,
so long as such Independent Director/Manager does not derive more than 5% of
his/her annual income from serving as director/manager of Affiliates of
Borrower.  As used herein, the term “control”
means the


 


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possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person or entity, whether through ownership of
voting securities, by contract or otherwise;


 


(ff)           has complied and
will comply with the separateness provisions of the Borrower Organizational
Documents since such Borrower Organizational Documents were executed and
delivered, and with the laws of the state of its formation relating to limited
liability companies or limited partnerships;


 


(gg)         with respect to any
entity comprising the Borrower that is a limited liability company, the
Borrower Organizational Documents provide and shall at all times continue to
provide that upon the occurrence of any event that causes the Single Member to
cease to be a member of Borrower, the Independent Director/Manager shall,
without action of any person and simultaneously with the Single Member ceasing
to be a member of Borrower, automatically continue as a member of such Borrower
and shall continue Borrower without dissolution;


 


(hh)         with respect to any
entity comprising the Borrower that is a limited liability company, Borrower
shall cause reputable Delaware counsel acceptable to Lender (the “Delaware
Law Firm”) to deliver to Lender an opinion letter reasonably satisfactory
to Lender, whereby the Delaware Law Firm opines (which opinion may be subject
to standard assumptions, qualifications, limitations and exceptions acceptable
to Lender), among other requirements of Lender, that: (1) the unanimous consent
of the Single Member and the Independent Director/Manager is required in order
for the applicable Borrower to file a voluntary bankruptcy petition; (2) the
provision in Borrower Organizational Documents that requires unanimous consent
as a condition to filing a voluntary bankruptcy petition is enforceable against
the Single Member; (3) the bankruptcy, dissolution, liquidation or death of the
Single Member will not cause the applicable Borrower to be dissolved; (4) no
creditor of the Single Member shall have the right to obtain possession of, or
otherwise exercise legal or equitable remedies with respect to, the applicable
Borrower’s property; and (5) Delaware law, not federal law, governs the
determination of what persons or entities have the authority to file a
voluntary bankruptcy petition on behalf of the applicable Borrower;


 


(ii)           the Borrower
Organizational Documents provide and shall at all times continue to provide
that Borrower shall not cause, permit, or empower the General Partner or the
Single Member, as applicable, manager, or any other person to consolidate or
merge Borrower and General Partner into any other entity, or, without the
affirmative vote and express written authorization of all members or partners
of Borrower and the Independent Director/Manager, to institute proceedings to
have Borrower and General Partner adjudicated bankrupt or insolvent, or consent
to the institution of bankruptcy or insolvency proceedings against Borrower and
General Partner or file a petition seeking or consent to, reorganization or
relief with respect to Borrower and General Partner under any applicable
federal or state law relating to bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of Borrower and General Partner or a substantial part of Borrower’s
and General Partner’s property, or make any assignment for the benefit of
creditors of Borrower and General Partner, or admit in writing Borrower’s or
General Partner’s inability to pay its debts generally as they become due, or
take action in furtherance of any such action; and


 


(jj)           the Borrower
Organizational Documents provide and shall at all times continue to provide (i)
that Borrower shall at all times maintain an arms-length relationship with any
Affiliates of Borrower, (ii) that Borrower shall at all times maintain independent
management over its daily business affairs, free from any control exercised by
any Affiliate of Borrower, and (iii) that to the extent that control of
Borrower is exercised by any manager, and the same individual acts as manager
or similar control person with respect to any Affiliate of Borrower, such
individual will act in accordance with the separateness requirements of the
Loan Documents and Borrower Organizational Documents, including,


 


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without
limitation (A) an express requirement under the Borrower Organizational
Documents that the manager of Borrower make all decisions regarding the
business of Borrower independent of, and not dictated by, any Affiliate of the
Borrower, and (B) the provisions of the Loan Documents and the Borrower
Organizational Documents relating to transactions with Affiliates of Borrower
and conflicts of interest.


 


ARTICLE IX.

MISCELLANEOUS


 


Section 9.1. 
          Survival.  This Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the execution and delivery of this
Agreement, the making the Loan hereunder and the execution and delivery by
Borrower to Lender of the Loan Documents, and shall continue in full force and
effect so long as any portion of the Indebtedness is outstanding and
unpaid.  Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party. 
All covenants, promises and agreements in this Agreement contained, by
or on behalf of Borrower, shall inure to the benefit of the respective
successors and assigns of Lender. 
Nothing in this Agreement or in any other Loan Document, express or implied,
shall give to any Person other than the parties and the holder of the Note and
the other Loan Documents, and their legal representatives, successors and
assigns, any benefit or any legal or equitable right, remedy or claim
hereunder.


 


Section 9.2.            Lender’s
Discretion.  Whenever pursuant to
this Agreement, Lender exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Lender, the
decision of Lender to approve or disapprove or to decide whether arrangements
or terms are satisfactory or not satisfactory shall (except as is otherwise
specifically herein provided) be in the sole discretion of Lender and shall be
final and conclusive.


 


Section 9.3. 
          Governing Law.


 


(a)  
        This Agreement was
negotiated in New York and made by Lender and accepted by Borrower in the State
of New York, and the proceeds of the Note delivered pursuant hereto were
disbursed from New York, which State the parties agree has a substantial
relationship to the parties and to the underlying transaction embodied hereby,
and in all respects (including, without limitation, matters of construction,
validity, performance, and maximum permissible rates of interest), this
Agreement and the obligations arising hereunder shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts made and performed in such State and any applicable law of the United
States of America, except that at all times the provisions for the creation,
perfection and enforcement of the liens and security interests created pursuant
to each Mortgage and Assignment of Rents and Leases shall be governed by the
laws of each State where the related Mortgaged Property is located, except that
the security interests in Account Collateral shall be governed by the laws of
the State of New York or the State where the Account Collateral is held, at the
option of Lender.


 


(b)  
        Borrower hereby consents to
the jurisdiction of any federal court or state court in New York, New York or
within the county and state in which any Mortgaged Property is located and
irrevocably agrees that, subject to Lender’s election, any legal suit, action
or proceeding against Lender or Borrower arising out of or relating to this
Agreement or the other Loan Documents may be instituted and litigated in such
courts.  Borrower hereby (i) irrevocably
waives, to the fullest extent permitted by applicable law, any objection which
it may now or hereafter have to the laying of venue of any such suit, action or
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum, and (ii)
irrevocably submits to the jurisdiction of any such court in any such suit,
action or proceeding.  Borrower does
hereby designate and appoint


 


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Corporation
Service Company, as its authorized agent to accept and acknowledge on its
behalf service of any and all process which may be served in any such suit,
action or proceeding in any federal or state court in New York, New York, and
agrees that service of process upon said agent at said address (or at such
other office in New York, New York as may be designated by Borrower from time
to time in accordance with the terms hereof) with a copy to Borrower at its
principal executive offices, and written notice of said service of Borrower
mailed or delivered to Borrower in the manner provided herein shall be deemed
in every respect effective service of process upon Borrower, in any such suit,
action or proceeding in the State of New York. 
Borrower (i) shall give prompt notice to Lender of any change in
address of its authorized agent hereunder, (ii) may at any time and from
time to time designate a substitute authorized agent with an office in New
York, New York (which office shall be designated as the address for service of
process), and (iii) shall promptly designate such a substitute if its
authorized agent ceases to have an office in New York, New York or is dissolved
without leaving a successor.


 


Section 9.4. 
          Modification, Waiver
in Writing.  No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement or any other Loan Document, or consent or waiver referred to in any
Loan Document or consent to any departure by Borrower therefrom, shall in any
event be effective unless the same shall be in a writing signed by the party
against whom enforcement is sought, and then such waiver or consent shall be
effective only in the specific instance, and for the purpose, for which
given.  Except as otherwise expressly
provided herein, no notice to or demand on Borrower shall entitle Borrower to
any other or future notice or demand in the same, similar or other
circumstances.


 


Section 9.5.            Delay Not a
Waiver.  Neither any failure nor any
delay on the part of Lender in insisting upon strict performance of any term,
condition, covenant or agreement, or exercising any right, power, remedy or
privilege hereunder, or under any other Loan Document, or any other instrument
given as security therefor, shall operate as or constitute a waiver thereof,
nor shall a single or partial exercise thereof preclude any other future
exercise, or the exercise of any other right, power, remedy or privilege.  In particular, and not by way of limitation,
by accepting payment after the due date of any amount payable under this
Agreement, the Note or any other Loan Document, Lender shall not be deemed to
have waived any right either to require prompt payment when due of all other
amounts due under this Agreement, the Note or the other Loan Documents, or to
declare a default for failure to effect prompt payment of any such other
amount.


 


Section 9.6. 
          Notices.  All notices, consents, approvals and
requests required or permitted hereunder or under any other Loan Document shall
be given in writing and shall be effective for all purposes if delivered or
sent by: (a) hand delivery, (b) certified or registered United States mail,
postage prepaid, (c) nationally recognized overnight delivery service, (d) by
facsimile transmission, addressed if to Lender or to Borrower at its applicable
address set forth on Schedule 5 hereto, or at such other address and Person as
shall be designated from time to time by any party hereto, as the case may be,
in a written notice to the other parties hereto in the manner provided for in
this Section 9.6, or (e) other than with respect to an
amendment or modification, an electronic medium.  A notice shall be deemed to have been given: in the case of hand
delivery, at the time of delivery; in the case of registered or certified mail,
when delivered or three Business Days after mailing; in the case of overnight
delivery and facsimile transmission, on the Business Day after the same was
sent; or in the case of electronic medium, when confirmed by e-mail.  A party receiving a notice which does not
comply with the technical requirements for notice under this Section 9.6
may elect to waive any deficiencies and treat the notice as having been
properly given.  Delivery by telecopier
of an executed counterpart of any amendment or waiver of any provision of this
Agreement or the Notes or of any Exhibit hereto to be executed and delivered
hereunder shall be effective as delivery of an original executed counterpart
thereof.


 


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Section 9.7. 
          TRIAL BY JURY.  BORROWER, TO THE FULLEST EXTENT THAT IT MAY
LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING,
WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH RESPECT
TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS.


 


Section 9.8. 
          Headings.  The Article and Section headings in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.


 


Section 9.9. 
          Assignment.


 


(a)  
        Borrower may not sell,
assign or transfer any interest in the Loan Documents, or any portion of the
foregoing (including, without limitation, Borrower’s rights, title, interests,
remedies, powers and duties hereunder and thereunder) without Lender’s prior
written consent.  Lender shall have the
right to assign or participate this Agreement and/or its interest in any of the
other Loan Documents and the obligations hereunder to any Person.  In the event of an assignment by Lender,
(a) the assignee shall have, to the extent of such assignment, the same
rights, benefits and obligations as it would have if it were an original
“Lender” hereunder; (b) the assignee shall be deemed for all purposes to be a
“Lender” hereunder; and (c) upon any such substitution of Lender, a replacement
or addition “Lender signature page” shall be executed by the new Lender and
attached to this Agreement and thereupon become a part of this Agreement.  After the effectiveness of any assignment,
the new Lender shall provide notice to Borrower of the identity, address and
other pertinent information pertaining to the new Lender.  Notwithstanding anything in this Agreement
to the contrary, after an assignment by Lender, the “Lender” (prior to such
assignment) shall continue to have the benefits of any rights or
indemnifications and shall continue to have the obligations contained herein
which Lender had during the period such party was a “Lender” hereunder.  Borrower agrees that each participant shall
be entitled to the benefits of Section 2.10 with respect to its
participation in this Agreement or any other Loan Document from time to time as
if such participant were a Lender; provided that, in the case of Section 2.10,
such participant shall have complied with the requirements of said Section, and
provided, further, that no participant shall be entitled to
receive any greater amount pursuant to Section 2.10 than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such participant had no
such transfer occurred.


 


(b)  
        Lender may from time to
time elect to enter into a servicing agreement with a servicer, pursuant to
which the servicer shall be appointed to service and administer the Loan and
the Account Collateral in accordance with the terms hereof and to exercise any
and all other rights of Lender with respect to the Loan as set forth in such
servicing agreement.  Lender shall
promptly notify Borrower if Lender shall elect to appoint or change the
servicer, and all notices and other communications from Borrower to Lender
shall be delivered to the servicer with a copy concurrently delivered to the
Lender, and any notice, direction or other communication from the servicer to
Borrower shall have the same force and effect as a notice, direction or
communication from Lender.  The servicer
shall be entitled to be reimbursed for any cost, expense or liability which is
incurred by the servicer pursuant to such servicing and administrative duties
and which would otherwise be reimbursable to Lender under this Agreement or any
other Loan Document in the same manner and to the same extent as if Lender
incurred such cost, expense or liability in the first place.  The parties hereto acknowledge and agree
that the servicer shall be a third party beneficiary to this Agreement and the
other Loan Documents.


 


Section 9.10. 
        Severability.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective


 


97

















 


to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.


 


Section 9.11. 
        Preferences.  Lender shall have no obligation to marshal
any assets in favor of Borrower or any other party or against or in payment of
any or all of the obligations of Borrower pursuant to this Agreement, the Note
or any other Loan Document.  Lender
shall have the continuing and exclusive right to apply or reverse and reapply
any and all payments by Borrower to any portion of the obligations of Borrower
hereunder, provided that such application or reapplication is performed by
Lender in accordance with the terms of this Agreement or any other applicable
Loan Document.  To the extent Borrower
makes a payment or payments to Lender for Borrower’s benefit, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or proceeds
received, the obligations hereunder or part thereof intended to be satisfied
shall be revived and continue in full force and effect, as if such payment or
proceeds had not been received by Lender.


 


Section 9.12. 
        Waiver of Notice.  Borrower shall not be entitled to any
notices of any nature whatsoever from Lender except with respect to matters for
which this Agreement or another Loan Document specifically and expressly
provides for the giving of notice by Lender to Borrower and except with respect
to matters for which Borrower is not, pursuant to applicable Legal
Requirements, permitted to waive the giving of notice.  Borrower hereby expressly waives the right
to receive any notice from Lender with respect to any matter for which this
Agreement or the other Loan Documents does not specifically and expressly
provide for the giving of notice by Lender to Borrower.


 


Section 9.13. 
        Failure to Consent.  If Borrower shall seek the approval by or
consent of Lender  hereunder or under
the Note, or any of the other Loan Documents, and Lender shall fail or refuse
to give such consent or approval, then Borrower shall not be entitled to any
damages for any withholding or delay of such approval or consent by Lender, it
being intended that Borrower’s sole remedy shall be to bring an action for an
injunction or specific performance.


 


Section 9.14. 
        Schedules Incorporated.  The information set forth on the cover,
heading and recitals hereof, and the Schedules attached hereto, are hereby
incorporated herein as a part of this Agreement with the same effect as if set
forth in the body hereof.


 


Section 9.15. 
        Offsets, Counterclaims
and Defenses.  Any assignee of any
of Lender’s interest in and to this Agreement and the other Loan Documents
shall take the same free and clear of all offsets, counterclaims or defenses
which are unrelated to this Agreement and the other Loan Documents which Borrower
may otherwise have against any assignor or this Agreement and the other Loan
Documents.  No such unrelated
counterclaim or defense shall be interposed or asserted by Borrower in any
action or proceeding brought by any such assignee upon this Agreement or upon
any other Loan Document.  Any such right
to interpose or assert any such unrelated offset, counterclaim or defense in
any such action or proceeding is hereby expressly waived by Borrower.


 


Section 9.16. 
        No Joint Venture or
Partnership.  Borrower and Lender
intend that the relationship created hereunder be solely that of borrower and
lender.  Nothing herein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy
relationship between Borrower and Lender nor to grant Lender any interest in
the Collateral other than that of secured party, mortgagee or lender.


 


Section 9.17. 
        Waiver of Marshalling of
Assets Defense.  To the fullest
extent Borrower may legally do so, Borrower waives all rights to a marshalling
of the assets of Borrower, and others with


 


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interests in Borrower,
and of the Collateral, or to a sale in inverse order of alienation in the event
of foreclosure of the interests hereby created, and agrees not to assert any
right under any laws pertaining to the marshalling of assets, the sale in
inverse order of alienation, homestead exemption, the administration of estates
of decedents, or any other matters whatsoever to defeat, reduce or affect the
right of Lender under the Loan Documents to a sale of any Collateral for the
collection of the Indebtedness without any prior or different resort for
collection, or the right of Lender to the payment of the Indebtedness out of
the Net Proceeds of the Collateral in preference to every other claimant
whatsoever.


 


Section 9.18. 
        Waiver of Counterclaim.   To the extent permitted by applicable law,
Borrower hereby waives the right to assert a counterclaim, other than
compulsory counterclaim, in any action or proceeding brought against it by
Lender or its agents.


 


Section 9.19. 
        Conflict; Construction
of Documents.  In the event of any
conflict between the provisions of this Agreement and the provisions of any of
the other Loan Documents, the provisions of this Agreement shall prevail.  The parties hereto acknowledge that they
were represented by counsel in connection with the negotiation and drafting of
the Loan Documents and that the Loan Documents shall not be subject to the
principle of construing their meaning against the party that drafted same.


 


Section 9.20. 
        Brokers and Financial
Advisors.  Borrower hereby
represents that it has dealt with no financial advisors, brokers, underwriters,
placement agents, agents or finders in connection with the transactions
contemplated by this Agreement. 
Borrower hereby agrees to indemnify and hold Lender harmless from and
against any and all claims, liabilities, costs and expenses of any kind in any
way relating to or arising from a claim by any Person that such Person acted on
behalf of Borrower in connection with the transactions contemplated
herein.  The provisions of this Section 9.20
shall survive the expiration and termination of this Agreement and the
repayment of the Indebtedness.


 


Section 9.21. 
        Counterparts.  This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.


 


Section 9.22. 
        Estoppel Certificates.  Borrower and Lender hereby agree at any time
and from time to time upon not less than fifteen (15) days prior written notice
by Borrower or Lender to execute, acknowledge and deliver to the party
specified in such notice, a statement, in writing, certifying that this
Agreement is unmodified and in full force and effect (or if there have been
modifications, that the same, as modified, is in full force and effect and
stating the modifications hereto), and stating whether or not, to the knowledge
of such certifying party, any Default or Event of Default has occurred and is
then continuing, and, if so, specifying each such Default or Event of Default; provided,
however, that it shall be a condition precedent to Lender’s obligation
to deliver the statement pursuant to this Section 8.22, that Lender
shall have received, together with Borrower’s request for such statement, an
Officer’s Certificate stating that, to the knowledge of Borrower, no Default or
Event of Default exists as of the date of such certificate (or specifying such
Default or Event of Default).


 


Section 9.23. 
        Payment of Expenses.  Borrower shall pay all Transaction Costs
(excluding any Tax Liabilities which are not payable by the Borrower pursuant
to Section 2.10), which shall include, without limitation, (a)
reasonable out-of-pocket costs and expenses of Lender in connection with (i)
the negotiation, preparation, execution and delivery of the Loan Documents and
the documents and instruments referred to therein; (ii) the creation,
perfection or protection of Lender’s Liens in the Collateral (including,
without limitation, fees and expenses for title and lien searches or amended or
replacement Mortgages, UCC financing statements or Collateral Security
Instruments, title insurance premiums and filing and recording fees, third party
due diligence expenses for the Mortgaged Property


 


99

















 


plus travel expenses,
accounting firm fees, costs of the Appraisals, Environmental Reports (and an
environmental consultant), and the Property Condition Assessments and costs and
fees incurred in connection with arranging, setting up, servicing and
maintaining the Account Collateral); (iii) the administration of the Loan
Documents and the Loan and response to any requests for Lender consent or approval
of any matter; (iv) the negotiation, preparation, execution and delivery of any
amendment, waiver, restructuring or consent relating to any of the Loan
Documents, and (v) the preservation of rights under and enforcement of the Loan
Documents and the documents and instruments referred to therein, including any
communications or discussions relating to any action that Borrower shall from
time to time request Lender to take, as well as any restructuring or
rescheduling of the Indebtedness, (b) the reasonable fees, expenses and other
charges of counsel to Lender or its servicer in connection with all of the
foregoing, and (c) Lender’s reasonable out-of-pocket travel expenses in
connection with site visits to the Mortgaged Property; provided, that so
long as an Event of Default has not occurred and is not continuing, the
Borrower shall not be obligated to pay for Lender’s travel expenses in
connection with more than one site visit to each individual Mortgaged Property
during any twelve consecutive month period and Lender shall use reasonable
efforts to minimize the Transaction Costs paid by Borrower in connection with
such site visits.


 


Section 9.24. 
        Non-Recourse.  Anything contained herein, in the Note or in
any other Loan Document to the contrary notwithstanding, but subject in all
respect to provisos (A) through (E) below, no recourse shall be had for the
payment of the principal or interest on the Loan or for any other Indebtedness,
obligation or liability hereunder or under any other Loan Document or for any
claim based hereon or thereon or otherwise in respect hereof or thereof against
(i) any Affiliate of Borrower other than Borrower), (ii) any Person
owning, directly or indirectly, any legal or beneficial interest in Borrower or
any Affiliate of Borrower (other than Borrower) or (iii) any partner,
member, principal, officer, controlling person, beneficiary, trustee, advisor,
shareholder, employee, agent, Affiliate or director of any Persons described in
clauses (i) through (iii) above (other than Borrower), and it is understood
that neither the Note nor any other Indebtedness, obligation or liability under
or with respect to this Agreement and any other Loan Document may be enforced
against any Person described in clauses (i) through (iii) above
(other than Borrower); provided, however, that the foregoing
provisions of this paragraph shall not:


 


(A)          prevent
recourse to Borrower, the assets of Borrower, the Mortgaged Property or any
other instrument or document which is pledged by Borrower to Lender pursuant to
the Loan Documents, including all Collateral;


 


(B)           have
any applicability whatsoever to the collateral pledged pursuant to the Pledge
Agreement or limit the liability of the parties under the Guaranty of
Non-Recourse Obligations; or


 


(C)           constitute
a waiver, release or discharge of any indebtedness or obligation evidenced by
the Note or secured by the Loan Documents, and the same shall continue until
paid or discharged in full;


 


(D)          prevent
recourse to Borrower and Guarantor, jointly and severally, and their respective
assets for repayment of the Indebtedness, and the Indebtedness shall be fully
recourse not only to Borrower but also to Guarantor, in the event:


 


(1)           Borrower
or any Affiliate contests or in any way interferes with, directly or indirectly
(collectively, a “Contest”), any foreclosure action or sale commenced by
Lender or with any other enforcement of Lender’s rights, powers or remedies
under any of the Loan Documents or under any document evidencing, securing or
otherwise relating to any of the Collateral (whether by making any motion,
bringing any counterclaim, claiming any defense,


 


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seeking any injunction or other
restraint, commencing any action seeking to consolidate any such foreclosure or
other enforcement with any other action, or otherwise) (except this clause (1)
shall not apply if Borrower or such Affiliate successfully asserts a Contest
and obtains a favorable court order for the Borrower as to same);


 


(2)           any
Mortgaged Property becomes an asset in a voluntary bankruptcy or insolvency
proceeding or any petition for bankruptcy, reorganization or arrangement
pursuant to federal bankruptcy law, or any similar federal or state law, shall
be filed (x) by Borrower or (y) against Borrower with the consent or
acquiescence of Borrower or the Guarantor or their respective Affiliates;


 


(3)           of
any Transfer in violation of the terms of the Loan Documents;


 


(4)           Borrower
or the General Partner or the Guarantor makes an assignment for the benefit of
creditors or admits, in writing or in any legal proceeding, its insolvency or
inability to pay its debts as they become due; or


 


(5)           of
any breach of the Side Agreement; or


 


(E)           prevent
recourse to Borrower and Guarantor, jointly and severally, and their respective
assets, and Borrower and Guarantor shall be fully and personally liable, for
any loss, costs, liability, damage or expense (including, without limitation,
attorneys’ fees and disbursements) suffered or incurred by Lender or any
Indemnified Party related to or arising from any of the following acts
committed by or on behalf of Borrower, Guarantor or any of their respective
Affiliates:


 


(1)           any
fraud, misappropriation or misapplication of funds (including Loss Proceeds or
Rents) in contravention of the Loan Documents, or intentional misrepresentation
contained in any Loan Documents or report furnished pursuant to any Loan
Document;


 


(2)           additional
financing obtained by Borrower (whether secured or unsecured) in violation of
the terms of the Loan Documents;


 


(3)           actual
material physical waste to the Mortgaged Property or material damage to the
Mortgaged Property resulting from gross negligence or willful misconduct;


 


(4)           of
any breach of Article VIII hereof;


 


(5)           of
any breach of any representation, warranty or covenant in this Agreement or the
Environmental Indemnity Agreement, concerning Environmental Laws and Hazardous
Substances;


 


(6)           any
security deposits received by Borrower or Manager from tenants not being
properly applied, returned to tenants when due or delivered to Lender, a
receiver or a purchaser of the Mortgaged Property in the event of a foreclosure
sale upon such Person taking possession of the Mortgaged Property;


 


(7)           any
Legal Requirement mandating the forfeiture by Borrower of the Collateral or any
portion thereof because of the conduct or purported conduct of criminal
activity by Borrower or any Affiliate in connection therewith;


 


101

















 


(8)           all
costs and expenses, including reasonable attorneys’ fees and expenses, incurred
in enforcing any obligation or liability or in collecting any amount due under
this Section 9.24(D) or this Section 9.24(E), the
Environmental Indemnity and the Guaranty of Non-Recourse Obligations, which, as
to Borrower, is a recourse obligation of Borrower as described in this Section 9.24(D)
or this Section 9.24(E), the Environmental Indemnity and the
Guaranty of Non-Recourse Obligations, or, as to Guarantor, is a recourse
obligation of Guarantor under the Guaranty of Non-Recourse Obligations or the
Environmental Indemnity;


 


(9)           the
failure to pay Impositions assessed against the Mortgaged Property to the
extent there was sufficient funds available to pay and Lender allows Borrower
to apply the same, or the failure to maintain insurance as required under
the  Loan Documents, or the failure to
pay any deductible amount in respect of any insurance maintained in respect of
the Mortgaged Property, or the failure to pay and discharge any mechanic’s or
materialman’s Liens against the Mortgaged Property to the extent there was
sufficient funds available to pay and discharge and Lender allows Borrower to
apply the same; or


 


(10)         any
Rents or Proceeds received or collected by Borrower, any Affiliate of Borrower
or Manager and not deposited into the Local Collection Account or the
Collection Account in accordance with Section 2.12.


 


102

















 


IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their duly authorized representatives,
all as of the day and year first above written.


 


	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  CITIGROUP
  GLOBAL MARKETS REALTY CORP.,

  a New York corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Donald Drewitz

  	
   

  
	
   

  	
  Name:

  	
  Donald Drewitz

  
	
   

  	
  Title:

  	
  Authorized Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  ARC COMMUNITIES 18 LLC

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Cody C. Holloway

  	
   

  
	
   

  	
  Name:

  	
  Cody C. Holloway

  
	
   

  	
  Title:

  	
  Assistant Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARC18FLSH LLC

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Cody C. Holloway

  	
   

  
	
   

  	
  Name:

  	
  Cody C. Holloway

  
	
   

  	
  Title:

  	
  Assistant Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARC18TX LP

  
	
   

  	
  a Delaware limited partnership

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Cody C. Holloway

  	
   

  
	
   

  	
  Name:

  	
  Cody C. Holloway

  
	
   

  	
  Title:

  	
  Assistant Vice President

  
					



 


S-1

















 


	
   

  	
  ARC18FLD LLC

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Cody C. Holloway

  	
   

  
	
   

  	
  Name:

  	
  Cody C. Holloway

  
	
   

  	
  Title:

  	
  Assistant Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ARC18FLWHO LLC

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Cody C. Holloway

  	
   

  
	
   

  	
  Name:

  	
  Cody C. Holloway

  
	
   

  	
  Title:

  	
  Assistant Vice President

  
					



 


S-2

















 


SCHEDULE 5


 


ADDRESSES
FOR NOTICES


 


	
  If to Borrower:

  	
  [insert applicable
  Borrower name]

  
	
   

  	
  600 Grant Street, Suite
  900

  
	
   

  	
  Denver, CO  80203

  
	
   

  	
  Attn:  John G. Sprengle

  
	
   

  	
  Phone:  (303) 383-7509

  
	
   

  	
  Facsimile:  (303) 294-9959

  
	
   

  	
  e-mail:  johns@arc-hs.com

  
	
   

  	
   

  
	
  With a copy to:

  	
  [insert applicable
  Borrower name]

  
	
   

  	
  600 Grant Street, Suite
  900

  
	
   

  	
  Denver, CO  80203

  
	
   

  	
  Attn:  Scott L. Gesell

  
	
   

  	
  Phone:  (303) 383-7506

  
	
   

  	
  Facsimile:  (303) 294-0085

  
	
   

  	
  e-mail:  scottg@arc-hs.com

  
	
   

  	
   

  
	
  With a copy to:

  	
  Skadden Arps Slate
  Meagher & Flom

  
	
   

  	
  Four Times Square

  
	
   

  	
  New York, New York  10036

  
	
   

  	
  Attn:  Fred B. White, III

  
	
   

  	
  Phone:  (212) 735-2144

  
	
   

  	
  Facsimile:  (917) 777-2144

  
	
   

  	
  e-mail:  fwhite@skadden.com

  
	
   

  	
   

  
	
  If to Lender:

  	
  Citigroup Global
  Markets Realty Corp.

  
	
   

  	
  388 Greenwich Street,
  11th floor

  
	
   

  	
  New York, New York  10013

  
	
   

  	
  Attn:  David Vadon

  
	
   

  	
  Phone:  (212) 816-7988

  
	
   

  	
  Facsimile:  (212) 816-8299

  
	
   

  	
  e-mail:  david.vadon@citigroup.com

  



 

















 


SCHEDULE 6


 


WORK RESERVE FUNDING
CONDITIONS


 


(1)  
        Not less than ten (10)
Business Days prior to the date on which Borrower desires Lender to withdraw
any funds on deposit in the Deferred Maintenance Escrow Account or Replacement
Reserve Account (collectively, the “Work Reserves”), Borrower shall
provide Lender and its servicer with a written request, including therein the
specific Approved Capital Expenditures or Immediate Repairs for which
disbursement is requested (collectively, “Approved Expenditures”; and
the related improvement or replacement project to which any such request for
disbursement relates shall be referred to as the “Work”) and such other
information (such as the price of materials and the cost of contracted labor or
other services) as Lender may reasonably require, and including, in the case of
a reimbursement of Borrower, evidence that the related costs have been paid.


 


(2)  
        On the date such request is
received by Lender and on the date of disbursement from the Work Reserves, no
Event of Default shall exist and remain uncured.


 


(3)  
        Lender shall have received
a certificate from Borrower stating that all Approved Expenditures to be funded
by the requested disbursement have been completed in a good and workmanlike
manner and in accordance with any plans and specifications reasonably approved
by Lender and all Legal Requirements of any Governmental Authority having
jurisdiction over the Mortgaged Property, such certificate to be accompanied,
in either case, by a copy of any license, permit or other approval by any
Governmental Authority required to commence (only for the first advance with
respect to each distinct item of work) and/or complete (only for the final
advance with respect to each distinct item of work) the related Work.


 


(4)  
        Lender shall have received
a certificate from Borrower stating that each Person that supplied materials or
labor in connection with the Approved Expenditures to be funded by the
requested disbursement has been paid in full, such certificate to be accompanied
by copies of invoices for all items or materials purchased and all contracted
labor or services provided.


 


(5)  
        Lender shall have received
appropriate lien waivers from each contractor, supplier, materialman, mechanic
or subcontractor, which lien waivers shall conform to the requirements of
applicable law and shall cover all work performed and materials supplied
(including equipment and fixtures) for the affected Mortgaged Property by that
contractor, supplier, subcontractor, mechanic or materialman through the date
covered by the current disbursement request.


 


(6)  
        At Lender’s option, Lender
shall have received a title search for the affected Mortgaged Property
effective to the date of the disbursement, which search shows that no
mechanic’s or materialmen’s liens or other Liens of any nature have been placed
against the Mortgaged Property since the date of recordation of such Mortgage
affecting such Mortgaged Property and that title to the Property is free and
clear of all Liens (other than the Permitted Encumbrances).


 


(7)  
        Lender reserves the right,
at its option and as a condition to any disbursement from a Work Reserve, to
approve (1) all drawings and plans and specifications, if any, for any Work
which require aggregate payments in amounts exceeding $50,000, and (2) all
contracts and work orders with materialmen, mechanics, suppliers,
subcontractors, contractors and other parties providing labor or materials in
connection with any Work which require aggregate payments in amounts exceeding
$50,000.  For any Work which requires
aggregate payments in amounts exceeding $50,000 or is structural in nature or
relates to the fire life safety systems at the Property, Lender may require an
inspection of the affected Mortgaged Property prior to making a monthly
disbursement from the applicable Work Reserve in order


 


3

















 


to
verify completion of the work for which disbursement is sought.  Lender may require that such inspection be
conducted by an appropriate independent qualified architect or engineer
selected by Lender and/or may require a copy of a certificate of completion by
an independent qualified architect or engineer licensed in the state where the
applicable Mortgaged Property is located and otherwise acceptable to Lender
prior to the disbursement of any amounts from the Work Reserve.  Borrower shall pay the reasonable,
out-of-pocket expense of such inspections as required hereunder, whether such
inspections are conducted by Lender or by an independent qualified
professional.


 


4